Wall Street's Wild, Wild Week

Aug 13, 2011
Originally published on August 13, 2011 9:00 am
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JACKI LYDEN, host: This is WEEKEND EDITION from NPR News. I'm Jacki Lyden. As we know, it was a zigzag week on Wall Street, at times reminiscent of the financial crisis of late 2008. Yesterday, the U.S. stock market closed on a high note, despite days of record-setting swings caused by investor concerns about the global economy. Coming up, we'll hear about the economic troubles across parts of Europe. But first, Roben Farzad is with us to talk about the week's ups and downs in the U.S. markets. He's a senior writer for Bloomberg Business Week, and he joins us from New York. Welcome to the program, Roben.

ROBEN FARZAD: Oh, thank you for having me.

LYDEN: So, we all witnessed the volatility on Wall Street. Tell us what happened these last few days, will you?

FARZAD: What didn't happen, I mean, short of Godzilla marching up and down Wall Street? I mean, this was a period coming off of that rather blindsiding downgrade of the U.S.'s credit rating on Friday, and people didn't want to make of it come Monday. They had a long weekend to stew over it. And then you suddenly have things coming unhinged in Europe, rumors back and forth, and before you know it, the Dow is down 7 percent on Monday and it feels like 2008 all over again. But the Dow then snaps back 5 percent on Tuesday, plunges again on Wednesday and ends the week, I think, down one-and-a-half percent. So, really people don't know what to make of it. It's almost a battle for the soul of the market.

LYDEN: Yeah, Godzilla or maybe Spiderman should show up, because yesterday a report showed that U.S. consumer confidence is at its lowest point in three decades, and yet investors seem to dismiss this. Why was that?

FARZAD: Because there is really a bifurcation between what's going on in corporate America right now with record cash on balance sheets and consumer sentiment, which, of course, we know is in the dumps because unemployment is horrific. There's still these lingering after-effects of the financial crisis and credit is still tight to get. And yet companies out there, especially multinational companies, just are sitting on a record cash hoard. So, it's very binary; it's either you sell on the news or you buy on the news. Certainly, it's becoming extremely difficult, prohibitively difficult, to sit on cash. The Federal Reserve has kept interest rates down near zero since December of 2008 and came out this week and telegraphed that we're probably going to have pretty much more of the same for the next two years. So what are you going to do?

LYDEN: So, do you think that the swings are going to continue or do you think it might settle down a bit?

FARZAD: I think the swings are going to continue. I think we're very much beholden to headlines, headlines coming out. I mean, every month we're on eggshells waiting for the jobs report number to come out but then suddenly you get this glimmer of hope out of nowhere. Yesterday, it was retail sales. I mean, figure that out. I don't get it. But then there's this other news that reminds us that we're still in the later innings of the financial crisis. If institutions were failing in the United States in 2008 and 2009, now we're at the risk of entire countries defaulting on their debt, and so we don't know how that's going to ripple across the pond and affect us. And so people are very much, you know, under that sword of Damocles as headlines come out every other day.

LYDEN: I see you've been studying your literature.

FARZAD: I'm chockfull of metaphors for you.

LYDEN: Well, we hope for good news. Roben Farzad is a senior writer for Bloomberg Business Week, speaking with us from New York. Thank you so much.

FARZAD: My pleasure. Transcript provided by NPR, Copyright NPR.