Can Things Get Worse?

From Barrons -
DEFEATED BY A DELUGE of grim news, stocks fell to their lowest level in nearly two years as investors brooded about $143 crude oil, mounting bank losses and the creeping spread of economic palsy.
Before it clawed back slightly Friday afternoon, the Dow Jones Industrial Average had fallen more than 20% from its October peak -- a technical definition of a bear market.
Last week saw the worst kind of selling: a relentless but orderly decline that showed little of the kind of panic that might hint at capitulation. The Dow's 7.8% drubbing in two weeks has traders asking, quite rightly, how much further oversold stocks can fall. But not many, not even those who argue we're closer to a stock-market bottom, seemed willing to take the plunge and buy -- yet.

Narrowing down the cause of hesitation is tough. Automakers' earnings were slashed by record fuel costs. Warnings of weaker profits from UPS (ticker: UPS) and Nike (NKE) pointed to broadening economic weakness. Consumer confidence continues to plummet, with home-buying intentions falling to a 26-year low and travel plans declining to its worst in four decades. Even a 5.7% rise in disposable personal income in May was dismissed as a momentary spike from rebate checks. Meanwhile, Street analysts dissed their peers with rare abandon and, as Barron's news editor Anita Peltonen adroitly suggests, seem to be "doing what mean girls do." Goldman Sachs (GS), for instance, downgraded Citigroup (C) and other brokerages, Wachovia cut down Goldman, and Sanford Bernstein slashed its forecast for Merrill Lynch (MER) this year from a 56-cent gain to $1.07 loss.

The Dow ended the week down 496, or 4.2%, to 11,347, and is 19.9% from its October peak. Its 10.2% drop so far this month could become its worst monthly loss since September 2002, and its worst June since 1930. The Standard & Poor's 500 fell 40, or 3%, to 1278, and is 18.3% from its October record. The Nasdaq Composite Index slipped 90, or 3.8%, to 2316, while the Russell 2000 gave up 28, or 3.8%, to 698.