- Commentary -

October 29, 2009 (FinancialWire) (By Philip Holmes) — Stocks took a plunge on Wednesday as investors mulled a disappointing report on new house sales and wondered if the recovery was sustainable. While Q3 earnings season continues to placate those fears, somewhat, (Visa (NYSE: V) and Qwest (NYSE: Q) beat expectations) some of the bigger numbers are troubling.

The Dow Jones industrial average closed at 9,762.69 on Wednesday, down by 119.48 point, while the Standard & Poor’s 500-stock index lost 20.78 points, to finish at 1,042.63. The Nasdaq composite index dropped 56.48 points, to close at 2,059.61.

What had them worried: a report that new home sales dropped to an annualized rate of 402,000 units from a 417,000 unit rate in August. Analysts had been looking for a 440,000 unit annualized rate.

Other indicators were steady if not spectacular. Durable goods orders rose 1% in September, in line with expectations. That had dropped a disappointing 2.6% in August.

We’ll see the Labor Department’s weekly jobless claims report on Thursday, but there was one brightening tidbit in the mix on Wednesday. One report showed that the number of metro areas reporting jobless rates above 10% dropped in September versus August.

Many are worried that the recovery, while tangible, has been weak, and heavily aided by enormous government intervention. What happens when the Uncle Sugar bowl runs out?

If unprecedented support for new homebuyers fails to spur new home sales, what happens when the tax credits are gone? Remember Cash for Clunkers?

One thing is certain: we have not fully reckoned with all the imbalances and unrealistic expectations caused by the credit bubble. A society that relies on cheap, easy credit allowing consumers and companies to live way beyond their means is not going to go back to “business as usual” once the bubble bursts. The Fed simply cannot create enough liquidity, nor the government borrow and spend enough, to make that happen.

[Go to http://www.financialwire.net/?s=philip+holmes to see more commentaries by Philip Holmes.]

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Quote of the Day: “People who commit adultery must die. Everyone knows that. Any movie tells you that!” Richard Dreyfuss

Today is: World Psoriasis Day.

Happy Birthday: Edmond Halley, Martin Folkes, Fanny Brice, Akim Tamiroff, Fredric Brown, Dominick Dunne, Bob Ross, Denny Laine, Richard Dreyfuss, Kate Jackson, Dan Castellaneta, Winona Ryder, Gabrielle Union, Brendan Fehr, Amanda Beard.

Today in History English adventurer, writer, and courtier Sir Walter Raleigh was beheaded in 1618 for allegedly conspiring against James I of England. Mozart’s opera Don Giovanni was first performed in 1787 in Prague. Mount Hood, Oregon, was named in 1792 after the British naval officer Alexander Arthur Hood by Lt. William E. Broughton who spotted the mountain near the mouth of the Willamette River. Spain declared war on Morocco in 1859. Sixteen countries meeting in Geneva in 1863 agreed to form the International Red Cross. The ticker-tape parade was invented in 1886 in New York City when office workers spontaneously threw ticker tape into the streets as the Statue of Liberty was dedicated. The Harvard University football team lost to Centre College in 1921, ending a 25 game winning streak, one of the biggest upsets in college football. The New York Stock Exchange crashed in 1929 in what will be called the Crash of ‘29 or “Black Tuesday,” ending the Great Bull Market of the 1920s and beginning the Great Depression. Muhammad Ali (Cassius Clay) won his first professional fight in 1960.Tanganika and Zanzibar joined in 1964 to form the Republic of Tanzania. The first-ever computer-to-computer link was established in 1969 on ARPANET, the precursor to the Internet. Space Shuttle Discovery blasted off in 1998 with 77-year old John Glenn on board, making him the oldest person to go into space. He had become the first American to orbit Earth on February 20, 1962.

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