LINDA WERTHEIMER, HOST:
It was another wild week for the global financial markets. There was some relief yesterday when stocks rallied. But overall, the stock market has lost 10 percent of its value since the beginning of the year. As NPR's John Ydstie reports, while the financial markets have been flashing warning signs, the broader economy keeps chugging along.
JOHN YDSTIE, BYLINE: Liz Ann Sonders, chief investment strategist at Charles Schwab, says it's pretty clear the financial markets have been trying to tell us we're headed for a recession.
LIZ ANN SONDERS: You could argue the market is trying to tell us that, but I think the market is probably not right.
YDSTIE: Because, Sonders says, the signals from the real economy are telling us there's no recession in sight. Job creation continues, wage growth shows signs of picking up, and retail spending rose at a healthy pace in January. David Kotok of Cumberland Advisors says that's partly because of a windfall consumers have gotten as the price of gasoline has dropped a dollar and a half per gallon.
DAVID KOTOK: Somewhere around $200 billion a year in spending power has been restored to households in America.
YDSTIE: So far, Americans have spent only about a third of the windfall, using the other two thirds to pay down debt and add to savings. Of course, Kotok says, the oil and gas industry has been battered, and that's been a huge driver of the losses in stock market indexes. Manufacturers whose exports have been hurt by weak global growth have also suffered. But he says, the indexes also contain companies that are thriving, like the U.S. auto companies.
KOTOK: In the last six weeks, markets have focused on the bad and ignored the good. Will that change? I think so.
YDSTIE: And yesterday, the Dow industrials and the S&P 500 shot up 2 percent, and oil prices recovered as well. But there's another element that's been weighing on the market, says Kotok, central bank policy, specifically, the move by European and Japanese central banks to push interest rates into negative territory.
KOTOK: I think negative interest rates have a risk component. We do not know how they're going to play out.
YDSTIE: But it's widely expected they'll hurt bank profits. And there's fear that if the U.S. economy falters, the Federal Reserve might adopt negative interest rates, too. The concern about bank earnings has battered their share prices. Kotok says that may not have been fair to U.S. banks.
KOTOK: It looks to me as if the market overreacted in the bank's stock sell-off.
YDSTIE: Liz Ann Sonders says there's one more worry, that the gloom spread by the stock market sell-off might itself spark an economic downturn.
SONDERS: Is this going to become a self-fulfilling prophecy? Can we actually talk ourselves into recession?
YDSTIE: Sonders says she thinks the economy is resilient enough that the answer is no. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.