Tuesday, April 7, 2009

Reality catches up to Bear market rally as home foreclosure numbers continue to rise and U.S. CEOs say they'll lay off more workers in 2009

Reality as to how bad things are outside of Wall Street finally caught up with the Bear market rally today, as many of the nation's CEOs said they expect to lay off more workers and home foreclosures continue to rise.

The Dow was down by almost 200 points at noon. So be careful about jumping into this rally. It doesn't have the needed economic numbers behind it. And every economist and pundit out there is simply guessing about a market bottom. Investing on someone's guess or your own can be disastrous at this stage.

For now, there is more downside potential. That's not being hopeful about America's future or negative. It is reality.

As one analyst put it, until foreclosures start to fall, there will be no economic recovery. And the number of foreclosures are expecting to hit high tide in the coming months in the nation's largest housing market, California.

There, adjustable rate mortgages start charging their highest payments.

As for the CEOs, here how CNBC reported their sobering sentiments:

More than two-thirds of U.S. chief executives plan additional layoffs and expect sales to decline in the next six months as their confidence in the economy continues to fall, according to a survey released Tuesday.

The Business Roundtable's quarterly CEO Economic Outlook Index fell to negative 5 — the first negative reading in the survey's six-year history — and down from a fourth-quarter reading of 16.5. A reading below 50 means CEOs expect contraction rather than growth.

"This quarter's results reflect the complex ongoing challenges currently at work in the U.S. economy," said Harold McGraw, who serves as Roundtable chairman and is also chief executive of publisher McGraw-Hill [MPH 0.03 -0.005 (-14.29%) ]. "Reduced consumer demand both here in the United States and abroad has placed significant pressure on American businesses."

One hundred U.S. CEOs were polled between March 16 and March 27 — during the recent rally in U.S. stocks — said they now expect real U.S. gross domestic product to decline 1.9 percent this year. That is below their December forecast, which anticipated flat GDP.

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