The U.S. stock market just entered its first correction of 10% since the March 2009 bear market low, according to Barron's magazine. In the paraphrased words of economist Michael Darda as reported by Barron's, are we experiencing an aftershock of the 2008 market crisis or are we having a relapse?

Catalysts for this recent correction are varied. China is clamping down on its easy money policy. Several European countries are in the midst of a liquidity/solvency problem. In the U.S., jobless claims unexpectedly rose last week and the Conference Board reported a surprising drop in its index of leading economic indicators. Both reports raised concerns that the economic rebound in the U.S. may be losing some strength, according to Bloomberg.

The case for optimism is also in plain sight. U.S. News and World Report says two new surveys out last week suggest, "We might be on the verge of experiencing the Great Shopping Comeback of 2010." Higher consumer spending could propel the economy and create jobs. In corporate America, first quarter earnings for the S&P 500 companies grew 55% from a year earlier and 77% of them beat their Wall Street estimate, according to Bloomberg. And, according to Federal Reserve Bank of New York President William Dudley as reported by Bloomberg, "The U.S. economy is recovering and we are now seeing the first signs of significant employment growth."

Economist Darda answered his own question and said we're simply having an aftershock, not a relapse. Even if he turns out to be correct, aftershocks could still generate some "scary headlines" in the near future. As always, we do our best to stay on top of these types of evolving situations. 

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.

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