Ken Leighton 3:42 p.m., July 16
It's Official, If a Bit Silly: We Have a Bear Market. More Disturbing: General Motors Could Go Bankrupt, Says Analyst
Stocks plunged today (July 2) as oil soared above $144 a barrel. Both the Dow Jones Industrial Average and Nasdaq are now 20 percent lower than their highs of last October. Officially, that marks a bear market, according to technicians, but this is an arbitrary distinction. The Dow dropped 166.75 to 11,215.51. Nasdaq plummeted 53.51 to 2251.46. Stock of General Motors plunged $1.77 to $9.98 as an analyst for Merrill Lynch said "bankruptcy is not impossible if the market continues to deteriorate." Imagine GM in bankruptcy. Here is a stunner: the stock market now values General Motors stock at $6 billion. It values Toyota at $148 billion and Volkswagen at $112 billion. Economists continue to debate if the U.S. economy is in a recession. This is also silly; the statistical calculation depends on how high the government says inflation is -- and it says it is low. Everyone knows it is not low. Rather than split hairs whether the economy is in a recession, let's just say that it stinks. Period. Tomorrow (July 3), important employment numbers come out. If they are bad, the stock market will probably sink further. If they're better than expected, stocks might inch back below bear market territory.