Stocks and recession

For weeks now, the stock market has been toying with Dow 10,000. Considering that the large-company index went as low as 6,547 in March, that feels like cause for celebration. But is it really?A growing chorus of market watchers says no. The concern is that the stock market is overwrought and that down is the only sensible direction to head. Sure, individual companies have been quick to bounce lower based on bad news. Both insurance outfits and financial firms lost ground on Tuesday thanks to two big events -- the passage of a health-reform bill by a key Senate committee and a Goldman Sachs downgrade by an influential banks analyst.More broadly, though, some strategists are seeing signs that stock values are inflated and due for a "correction," that lovely Wall Street euphemism for falling prices.One such signal: stocks are about as expensive as they have been in the long term, even though the economy remains weak. According to data from Thomson Reuters, the companies in the S&P 500 index are trading at an average 15 times expected earnings over the next 12 months. That's a completely typical valuation. But this isn't a completely typical business environment. If the recovery is slow, and unemployment remains high -- and both seem likely -- then even a typical valuation will seem too optimistic
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