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Stock hammered amidst more signs of a coming recession

Bust follows boom under capitalism
By Masao Suzuki |
January 4, 2019
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San José, CA - The New Year is starting off much the way 2018 ended: with U.S. stocks being hammered again. On Thursday, January 3, the Dow Jones Industrial Average (DJIA) fell more than 600 points, the technology heavy NASDAQ fell more than 200, and the broad S&P 500 fell more than 60 points. All the averages fell more than 2% to put the year into the red.

Apple Corporation, which just a few months ago was the first company to rise above $1 trillion in stock market value, fell more than 8% after reporting that sales and profits were down for the last three months of the year. Delta Airlines also cut back on their estimated sales in the fourth quarter, dragging down other airlines with it. The Institute for Supply Management released their report on December manufacturing, which fell 8 points from November, the biggest one month drop since the financial crisis in 2008.

These reports add to the growing view that the almost ten year economic expansion is coming to an end. These cycles of boom and bust are a regular feature of capitalism. Businesses make a profit by paying workers less than the value of what their labor produces, so they are not able to buy everything they make. At the same time, companies reinvest their profits to be able to produce more and more. This leads to what Marx called a “crisis of overproduction” or what is commonly called a recession.

Recessions cut deeply into corporate profits, which are the foundation of stock prices. As more signs of a coming recession are revealed, investors are selling stocks and forcing prices down.

 

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