Friday, March 13, 2009

Financial Crisis, 13 Mar 2009: Dow 7,223.98, +53.92 (+0.75%)

Today the market rose to close the week up, with the Dow Jones Industrial Average back over 7,200. It was up 53.92 points on the day (+0.75%), ending at 7,223.98. For the week the Dow bounced back nearly 600 points over the prior week’s close of 6,626.94, recovering all the losses of the prior week and well over its close at 7,062.93 of two weeks ago. That is a rise of over 9% for the week, and a net rise for March of 2.28%.

Though this is welcome news, having a “two-week high” is nothing to really get complacent about. World Bank President Robert Zoellick warned of all economic stimuli giving the world economy a “sugar high” speaking in London before the start of the G20 Summit.

Another bit of good news for the “buy American” crowd was that the U.S. trade deficit fell 9.7% to $36 billion for the month of January. This was down $2 billion compared with expectations. Adjusted for inflation, the real trade deficit was $41 billion. However, this news must be couched in the fact that all global trade is significantly down for the year. And in the long run, it could hurt many industries and international relationships that rely upon global trade for their success.

Many elements of the world economy are still shaking out after the downturn. European powers are considering protectionism. They are still in a great deal of insecurity over their eastern European debt obligations. Austria, which had extensive dealings with eastern Europe after the fall of the Iron Curtain, now finds itself in a greatly insecure position.

China is trying to avoid having its trade deficit with the U.S. shrink, and is mulling over the security of U.S. Treasury bonds. Meanwhile, the U.S. has dispatched a Navy destroyer, the USS Chung-Hoon, to protect a maritime surveillance ship, the Impeccable, off the Chinese coast. Along with the other issues, a prognosis of uncertainty is developing between the U.S., the present pre-eminent world power, and China, the developing powerhouse of Asia.

So while the news for the week is extremely good for the short term, there remains a great deal of uncertainty for the coming year ahead.

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