There’s no pleasing the US markets. They whine, moan and groan about the lack of detail in bank bailout programs, complain $US789 billion is too much, or not enough, and then fret about earnings when it’s plain the recession is forcing them lower.

Even the looming approval tonight, our time, of Obama’s $US789 billion economic stimulus package passed Wall St by without too much enthusiasm.

A surprising 1% rise in retail sales in January flew directly in the face of reports from major retailers as oil prices slumped another 5% to take the total fall over the past five days to 17%. New York prices closed under $US34 a barrel this morning.

Wall Street was down more than 1% at one stage, but recovered most of the losses in late trade.

Investors seemed more worried about the oddity of the retail sales figure, the first positive move in seven months, after so many big chains such as Target, The Gap, Macy’s, JC Penny and others reported falls in same store sales of 5% to 20% last month.

The rise reflected higher petrol prices and more spending on items such as clothing and food. The increase followed a revised 3% fall (2.7% originally) in December. Excluding car sales, the rise was a surprisingly strong 0.9%. But compared to January 2008, retail sales were down a stunning 9.7%.

They ignored a slowing in the pace of foreclosures among troubled US households in January, the first real slowing for months. However, foreclosures were still 18% higher than in January 2008, even though that’s better than December’s 41% rise on the same month in 2007.

But house prices fell 12.4% in the year to January, according to the monthly survey by US real estate agents. That’s the biggest fall since the National Association of Realtors started collecting the figures 30 years ago.

The stimulus package will be voted on tonight and signed into law by President Obama over the weekend.

Some investors have condemned the package to failure — even before it is passed — while others are concerned that results from leading companies in Europe and the US are falling, ignoring the fact that both economies are in a severe recession.

The disconnect between Wall Street (and brokers generally) and the reality of the economy is glaring.

In Europe, Spain is now officially in recession with 14% of the population unemployed and a shrinking economy. Figures for 4th quarter Eurozone growth are out tonight and expected to show a contraction of at least 1% and perhaps 2% in Germany. Striking French statisticians (its another ‘winter of mild discontent’ in Paris) revealed that the French economy contracted in the final quarter of 2008 as well.

In the US, the Labor Department said the number of first up jobless claims eased 8,000 to a seasonally adjusted 633,000 for the week before last. But a separate report showed the number of people staying on unemployment benefits after drawing an initial week of aid rose by 11,000 to a record 4.810 million in the last week of January.

The US Commerce Department reported that US business inventories fell 1.3% in December, the largest fall since October 2001, after the index dropped 1.1% in November.

Business sales fell 3.2% in December after plunging by a record 5.7% in November.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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