Dow takes another dive: what is making investors worried
Obama, Bernanke, and Geithner meet as investors worry that political leaders – in the United States and Europe – and central banks can't do much more to support a weak economy.
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An index of small-business confidence, tracked by the National Federation of Independent Business, has been falling for five straight months. One top business concern is that the president isn't focused enough on clearing away regulatory hurdles to job creation.
Concern about political leadership extends overseas, where stock markets have been falling in tandem with the US. Some nations, like Japan, may be unable to avoid a rise in their currency exchange rates, which could damage exports. And in Europe, concern is rising that Italy and Spain will "need a Greek-like bailout with funds that may be nearly impossible to come by," writes Sam Stovall, chief investment strategist at Standard & Poor's.
Even as fiscal policies are constrained by high debt levels that soared after the 2008 financial crisis, central banks also may be running near their policy limits. Some economists say that, with their short-term interest rates already near zero, the Federal Reserve and others have little ammunition left to fight a possible recession.
The Fed has tried QE1 and QE2 (two rounds of so-called quantitative easing of monetary policy). Now a QE3 policy is possible, perhaps involving new unconventional means of boosting growth.
On Tuesday, markets rallied as the Fed said it would keep its interest rate low for another two years – a signal of its determination to provide support to a fragile economy.
But the stock-market reversal Wednesday suggests that announcement, by itself, still leaves many investors in doubt about the path ahead for the economy and corporate earnings.
Obama and Fed Chairman Ben Bernanke met Wednesday, along with Treasury Secretary Tim Geithner, to discuss the economic outlook, fiscal policy, and "the situation in Europe," according to a White House statement.
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