Wall Street Wobbles, Opinions Abound

The Wall Street mess has clearly provoked Main Street. As of midday today the market was treading water–after yesterday’s near drowning. Then the Fed stood pat, and stocks fluctuated broadly in response. They closed up strongly however. The Dow ended at up 141.51, or 1.3 percent, the Nasdaq was up 1.28 percent, or 27.99, at 2,207.90; the S&P 500 finished up 1.75 percent, or 20.90, at 1,213.60. But according to some economy watchers, the worst is yet to come–there are plenty more shoes still to drop.But while the public awaits the next market gyration with baited breath, the market has already provoked full-throated responses in the political arena this election year. Yesterday, Republican presidential nominee Sen. John McCain said, “The fundamentals of our economy are strong,” a position that the campaign of Democratic nominee Sen. Barack Obama responded to quickly. The Obama campaign has already released a TV ad with the tag line, “How can John McCain fix our economy if he doesn’t understand it’s broken?” The McCain campaign promptly began damage control, distributing a statement in which their candidate described the economy as “in crisis.” In another blow to the economy that got a little lost amidst the Wall Street news, Hewlett-Packard announced Monday that over the next three years it will eliminate 24,600 jobs, half of them in the U.S. The restructuring follows HP’s $13.9 billion acquisition, announced in May and completed last month, of Electronic Data Systems. The reduction hits about 7.5 percent of the two companies’ combined workforce. In making the announcement, HP CEO Mark Hurd explicitly left the door open for further job cutbacks. Peter Slatin, editorial director for Real Capital Analytics, New York, told CPN that even with Lehman brothers in bankruptcy, AIG perhaps headed there and Merrill Lynch sold, the shoes haven’t nearly stopped dropping. Citigroup is still struggling, he noted, and Swiss insurer UBS is in trouble, adding about the latter, “We just don’t know the extent of it yet.” Even after the decline in commercial property values over the recent past, Slatin said, “Sellers will have to be more realistic about pricing.” Deal volume has been staying down, he said, because “Buyers don’t see value in the prices that sellers are demanding.” A further softening of prices, he guesstimates, could range from 5 to 25 percent, and will penetrate to secondary and tertiary markets, though to a lesser extent. Real Capital Analytics’ figures show year-over-year declines in the nationwide volume of commercial real estate sales of 79 percent in April, 77 percent in May, 63 percent in June, 81 percent in July and 69 percent in August. And although $360 billion in loans tied to CMBS have been written since 1999, Slatin said, there has been zero CMBS activity since June.