Business News

Greek gift leads to rally

| More

by Peter Switzer

Stocks rallied on Wall Street and while investors ignored weaker US economic data, they loved news that Greece was likely to get a new bailout package!

And the market went up despite three pieces of pretty ordinary economic news underlining the fact the US is in a soft patch. However, today’s positive action shows how the Euro-debt concerns top the wall of worry at the moment.

Data overnight

Let’s zoom in on the economic story and this is what was revealed:

The Conference Board's consumer confidence index for May hit a six-month low going from 66.0 in April to 60. The economists’ guess was around 66!
The Chicago Purchasing Managers Index came in at 56.6 for May but was 67.6 in April and the expectation was 62.6!
Also home prices fell again with the S&P/Case Shiller composite index of 20 metropolitan areas giving up 0.2 per cent in March. This was tipped and some experts believe the house price rout has not bottomed but they are guessing.

Despite this the Dow was up 128.21 points to 12,569.79 and the S&P 500 was up just over one per cent to 1345.2.

Global outlook

Clearly the Greek news was important for this rally and it should be pointed out that many US experts think the problems for the US economy won’t last.

Japanese fallout, debt-ceiling arguments in Congress and bad weather will eventually disappear from sight — they are temporary headwinds.

Finally, CNBC points out that June has not been a great month for shares in recent times.

The Dow Jones index has been out of luck for the past six Junes in a row! However, it has had a positive experience twice since the year 2000.

On the law of averages it could beat the trend but with that ordinary economic data it could find it hard.

But one last point — the market is said to be forward looking and so it will be what investors see in the future that will undoubtedly determine June’s result.

For me I am sticking to wait for a dip and buy!

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, June 01, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Ignore stupid recession headlines

So what happens this week?

Suddenly, Wall Street went positive – what just happened?

Be warned – things will get better!

News, news, news: the good, the great and the unimportant