Exactly five years ago today, American equity markets hit their all-time highs. Among other indicators, the Dow Jones Industrial Average (^DJI 0.96%) traded at about 14,000 and the S&P 500 (^GSPC 1.51%) stood above 1,550. To investors and anyone in the financial industry, it seems a lifetime ago, as both the market and the economy continue to suffer the aftershocks of the 2008 and 2009 financial cataclysm.
The performance of the market today is further evidence that we remain mired in past mistakes. Following the release of a gloomy report, the Dow is currently down by 85 points, or 0.63%.
Why the Dow's down
Earlier today, the International Monetary Fund released its quarterly World Economic Outlook. As I discussed this morning, the report warns that risks for a serious global slowdown are "alarmingly high," that "confidence in the global financial system remains exceptionally fragile," and that "bank lending has remained sluggish across advanced economies." The report's authors see the 17-country euro area contracting by 0.4% and both the U.S. and Japanese economies expanding by 2.2%.
The IMF report is unwelcome news, given similar concerns about the state of the Asian economies. In an analogous report published yesterday, the World Bank decreased its estimates for economic growth in Asia and the Pacific region from 8.2% in 2011 to 7.2% this year. With respect to China specifically, weak exports and lower investment levels are expected to decrease the country's output growth to 7.7% this year, down from 9.3% in 2011.
Added to these concerns are questions about the upcoming corporate earnings season, which is set to kick off today when economic bellwether Alcoa (AA +0.00%) reports third-quarter earnings after the closing bell. According to The Wall Street Journal's Market Data Center, analysts expect the company to break even this year. If so, the performance will be a far cry from the third quarter last year, in which the aluminum giant recorded a profit of $0.15 a share.
Among other stocks trading lower today are Intel (INTC 5.00%) and Hewlett-Packard (HPQ 1.22%). As my colleague Matt Thalman noted earlier, both companies were the unwitting recipients of analyst downgrades. Stanford Bernstein tagged Intel with an "underperform" rating, and Citigroup reduced HP to "sell." Shares in the companies are lower by 2.6% and 0.7%, respectively.
