Behind Wall Street’s sell-off

Marketplace Staff Jun 27, 2008
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Behind Wall Street’s sell-off

Marketplace Staff Jun 27, 2008
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TEXT OF INTERVIEW

Renita Jablonski: Here’s what we’re dealing with this morning. Wall Street is coming off of a huge sell-off — the Dow was down 358 points yesterday, a loss of 3 percent. This morning brings a mixed bag of reports.

First, the bad news. Consumer confidence hit another 28-year low in June. The good news is personal spending was up more than expected last month. The rise of eight-tenths of a percent was tied to the government stimulus checks that boosted household budgets.

FTN Financial’s Chris Lowe is standing by. Hi Chris, what do you make of these reports?

Chris Lowe: Well, people are absolutely squeezed, and what we saw in May in the consumer spending numbers was the tax rebates. And quite a bit more cash reached consumers than economists thought in May. The Treasury Department did a really good job of expediting the checks. So consumption was pretty solid. But people also know that once they get that check, there’s not another one coming behind it. So the message of the two reports together is that people are facing rising food and energy prices, and I think growing increasingly nervous about what that means.

Jablonski: How does that translate to Wall Street this morning after the incredible sell-off yesterday?

Lowe: It’s much calmer today than yesterday, and I think that’s because the selling that had to be done, most of it is done.

Jablonski: Tell me this — are we going to bottom out here any time soon?

Lowe: I think we probably will. You know, a good part of what we saw yesterday was what’s called window dressing. You know, obviously when you see a 360 point drop in the Dow, it sounds much more violent than that. But it’s fund managers who, over the course of the quarter, bought mostly financial stocks on the hopes of a rebound. The rebound didn’t come, and as quarter end approaches, they all suddenly realize we’ve got to get rid of these losers out of our portfolios, otherwise, we have to explain to our investors why we own them. So I wouldn’t be surprised if we sort of wander sideways for the last couple of days of the quarter, but then in early July, we start to see the market recover.

Jablonski: We’ve got quite a summer ahead. Chris Lowe is with FTN Financial. Thanks so much for joining us.

Lowe: You’re welcome.

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