Stock market sees a bull? A bear? No, a tortoise.(Read article summary)
Stock market has a hard time adjusting to tortoise-like growth. The US stock market has now lost a third of its July gains.
Wall Street likes action. Be it bull or bear, traders love excitement. So when the world economy starts acting like a winded tortoise, traders get antsy.
That may help explain the market's crazy ups and downs of the summer.
On Wednesday, the Dow Jones Industrial Average dropped 265 points or about 2.5 percent, its biggest plunge in more than a month. In two trading days, the Dow has lost a third of its extraordinary run-up since early July.
The broader Standard & Poor's 500 index traced a similar pattern, closing down 2.8 percent Wednesday. The tech-heavy Nasdaq swooned 3 percent on Wednesday and has now lost nearly half of its July run-up. Major indexes in Japan and Europe saw comparable declines.
Wall Street has been all over the place in terms of optimism this year. This spring, it was surging as the US recovery looked strong. In May and June, it wilted in the heat of worry over Europe's debt crisis.
In July, it forgot about Europe and boomed again. Now, it's showing signs of weakness.
But many economists have been signaling for months that they expected the economy to slow in the second half of 2010. Now that it's upon us, is anyone surprised?
It's true that a few troubling signs, especially slower-than-expected growth in China, has economists revising their growth forecasts downward.
All that means, however, is that the tortoise economy is slowing its pace. It's not turning around. Those who believe the United States is headed for a double-dip recession are definitely in the minority.
The Federal Reserve, in a highly symbolic move to counter deflation, said Tuesday it would not trim its huge balance sheet. But it took no other action to keep the recovery from slowing to a weak but sustainable pace.
Tortoises don't create drama like bulls or bears. They're boringly steady and numbingly slow. And it looks as though they'll set the pace for this phase of the recovery.
That drives traders crazy.