Wall Street will welcome the new American president this week with much hope for a new beginning, but the welcome could be spoiled by company earnings that are likely to indicate a deepening recession in the U.S. economy.
Last week, the Dow Jones index plunged 5.6 percent to 8,281 points. The S&P 500 index fell by 5.9 percent to 850 points, while the Nasdaq index lost 3.02 percent, diving to 1,529 points. Last Friday, the curtain fell on the presidential era of George W. Bush on Wall Street. Since 2001, when Bush entered the White House, the S&P index has lost more than 36 percent, and during that period, stocks have lost more than $4.6 trillion in value. On Monday, Wall Street will be closed in observance of Martin Luther King Day, and on Tuesday, the inauguration of the new president Barack Obama will follow.
Investors hope that the new government will quickly come up with new measures to stop the recession. "The key is what and how quickly the new administration will do. A big question is what they will do to solve the problems in the banking system. I don’t believe anyone expects bombastic announcements during the inauguration itself, but just a few days after that, investors will want to see a plan that will change the situation in the economy," says Tim Ghriskey, director at Solaris Asset Management. However, investors’ hopes for a better tomorrow on Wall Street could be dampened by the announcement of company earnings from the past quarter. According to analysts’ estimates, in the last quarter of last year, company earnings fell by about 20 percent compared to the same period the previous year, marking the sixth consecutive quarter of declining profits.
