Monday, February 1, 2010

Market Rebounds, Erases Some Losses

Having spent the majority of my day researching the establishment of local currencies (a little progress, and more to be reported at a later date), this daily dose of economic news and views is going to be brief.

Stocks were generally higher on the first day of February. It could have had something to do with economic data, though that was generally mixed. Construction spending in December was down 1.2%, worse than the 0.5% decline that had been forecast.

January's ISM Manufacturing Index hit a five-year high at 58.4, much better than the consensus call of 55.5. That was the most positive news the market has seen in months, and that seemed to be where investors were mainly focused. Additionally, personal income rose 0.4% in December, though spending for the month increased just 0.2%, implying that consumers were saving during the holidays, rather than spending, as our great inflationist Fed would have us do.

In any case, all of that added up to considerable glee on Wall Street, erasing some of the losses incurred over the past two weeks. All 10 industry sectors sported positives, with basic materials leading the charge. Gold and silver soared in value, which can be viewed either as a consequence or a cause of the rally. The metals had been trending lower for weeks.

Dow 10,185.53, +118.20 (1.17%)
Nasdaq 2,171.20, +23.85 (1.11%)
S&P 500 1,089.18, +15.31 (1.43%)
NYSE Composite 7,008.23, +124.45 (1.81%)

Advancing issues clobbered decliners, 4719-1826, though there were just 114 new highs and 61 new lows. The narrow margin continues to suggest that the market is still weak and in danger of rolling over. Volume was tepid, at best, even though there was obviously more interest in buying than selling.

One caveat to this entire scenario must be exposed: the rally which began in earnest in March 2009, may have been more a trader's push than any real investment-making by the general public. Even though the market serves as a discounting mechanism and the accepted logic is that the market is 6 months ahead of the economy, the current condition is just not bearing fruit. If we rallied sharply from March through June, and then again from late July through December, the initial signs of recovery should not be as well-disguised as they are. That may be begging the question, but how long is the American public supposed to wait before seeing real growth, not the inflation-inspired, deficit-spending, government-stimulated variety which is now evident?

NYSE Volume 4,823,760,500
Nasdaq Volume 2,234,145,750

As mentioned above, the metals were higher. Gold spiked $21.00, to $1,105.30. Silver was up 46 cents, to $16.65. The bad news was that oil followed, gaining over $2.00, to $74.93. Ouch!

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