More wow on Wall Street
by Peter Switzer
And the solid finish was helped by better economic news, showing the fundamental truth in the old Bill Clinton line: “It’s the economy, stupid!”
First there was a decline in weekly jobless claims and then retail sales rose, admittedly by a lesser amount than was expected but these figures have gone up for 10 months in a row.
For those looking for great omens — and who isn’t it? — the S&P 500, which rose about 0.9 per cent, has now been up three days in a row!
Why is this big news? Well try the fact that we haven’t seen that since April. This three-day gain is quite impressive and lines up with my charts guy, Lance Lai, who showed on my show that the charts are pointing to a bounce. (Lance’s column is on our website.)
The previous quarter followed the old script, which follows the advice: “Sell in May and go away.” Now we’re in a new quarter and provided economic news and corporate earnings can impress on the high side or at least remain positive, then we could set ourselves up for a bit of a rally.
Be clear on this, we’re not out of the woods yet. Euro debt anxiety persists and so do concerns over European banks. Then there are double dip worries and if these can play out to the positive over coming months, once again this will work to create an overdue rally.
Recovery to continue?
On CNBC they interviewed an economist, David Hale of Chicago-based Hale Advisors, who has a good reputation for his global insights and he said the US recovery, which is nine months old, will continue. He cited the role of the public sector and the “robust corporate sector” in keeping the growth show on the road.
He pointed to the 8.5 million job losses in the US, which now have helped productivity, and the cash in corporates, which will help capital spending by business.
He says America has a housing sector disaster and a state government sector blighted by budget deficits and they are “missing in action”, hurting the recovery.
However, he sees a housing boom out there over the next 12 to 18 months! He argues that Obama should drop his tax increase plans for next year as the time is not right to add tax slugs to uncertainty.
He believes the global growth story of the IMF that the world economy will chug along at a strong 4.6 per cent. But he thinks China is now trying to slow down from 12 per cent to eight per cent and that is good for China’s anti-inflation goals but it will put pressure on the global economy.
This in turn could challenge stock prices as well and it explains why commodity prices and shares such as BHP Billiton have been on the soft side.
In summary, the story is we’re heading up but don’t expect boom times for a while yet. That said, this story suggests that shares have been oversold in recent times and this bounce back was overdue.
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Published on: Friday, July 09, 2010blog comments powered by Disqus