Sub-Prime Mess Revives

As I reported yesterday, the most recent dollar decline was due to reports indicating increasing weakness in the housing and retail sectors. More specifically that meant earnings warnings from D.R. Horton, Home Depot, Sears and several other companies in these sectors, as well as downgrades from both Standard & Poors and Moody's on the credit rating of sub-prime mortgage debt backed bonds.

Relatively bullish signals from other sectors have made some people to dismiss the risk of a recession, but this clearly serves as a reminder that the damage from the sub-prime mess is far from over and could yet drag down the aggregate U.S. economy into a recession. Nouriel Roubini has a great overview of the situation which I recommend.