Pent Up on Pins and Needles

Story Highlights:

• Negative news piled up over the weekend and pushed markets down Tuesday.
• We note nothing new or substantially surprising in any of the data. Economic bad news was mostly anticipated.
• As markets once again tread near November lows, we're reminded of the last bear market's testing and retesting of lows—not uncommon during bear market bottoms.

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It's raining cats and dogs in California and mud's sliding down the coastal cliffs. A similar torrent of muddy news in global markets was dammed in the US by a three-day weekend. But pent-up investors on pins andneedles acted Tuesday, pushing markets sharply lower.

Here's a sampling of the negative news on display.

The global economic slowdown continued as Japan and the EU announced declining GDP last quarter—Japan's results were particularly weak. Moody's warned it may downgrade European banks heavily invested in economically fragile Eastern European countries. These countries began showing signs of stress as early as last year when deteriorating economic conditions forced many to take loans from the International Monetary Fund (IMF).

In the US, the Big Three prepared restructuring plans in return for more federal aid to avert bankruptcy. The automakers' continued weakness and looming bankruptcy shouldn't surprise. We've believed bankruptcy is the best option for a while now. A last-minute amendment to more stringently limit executive pay was added to the stimulus package signed today by President Obama. We wonder why the government thinks it advisable to simultaneously punish and try to fix banks. It really needs to be one or the other—the mixed messages continue to make investors uneasy. A few widely watched economic indicators came in negative: The New York Fed's general economic index fell at a record pace in February, and consumer confidence dipped toward November lows. And last but not least, the SEC charged the Stanford International Bank with an $8 billion case of financial fraud, further sapping investor confidence, à la Madoff.

Add continued uncertainty on exactly what the US plan is to aid the financial system, and that's more than enough bad news to last us for a little while. But we note nothing new or substantially surprising in any of it. The economic headlines were mostly anticipated, and we've warned to expect continued negative economic reports and more fraudsters revealed. As markets close in on November lows, we're reminded of the last bear market's testing and retesting of lows in October 2002 and March 2003—not uncommon during bear market bottoms. Although investors unleashed the weekend's pent-up worry all in a day, we don't think the deluge portends much worse to come.