I don’t know about you, but me thinks the market’s behavior yesterday and today reflects a healthy sense of appetite. What I mean is that for most of January, the market has been eating a bit too much a bit too fast. I would not call it gorging, but I could call it overly indulgent. Yesterday and today, it appears the market is getting a sense of that, a sense that its appetite has been a little askew. The market’s behavior is a lesson for all of us – when we indulge our appetite a bit too much a bit too fast, we should back off, take a break, slowdown.
It seems that both the politicos in Washington and the US economy are also taking a break. Their reasons are different from the market’s for backing off, but, nevertheless, both have done so. The politicos have put off any argument over fiscal issues until the end of February, and beyond, and the US economy pulled in last quarter.
The coming political battles will have some impact on the market in the near term, and the result of those battles could affect the US economy and the market dramatically in the longer term. This is reality. But so is the data below regarding the US economy. The question for market players is what affect the data below will have on the market in the near term.
- The Labor Department says unemployment rates fell in more than three-quarters of the largest U.S. cities in November compared with the same month a year ago.
- Rates fell in 290 of the nation’s 372 largest metro areas. Rates rose in 68 cities and were unchanged in 14.
- Fewer cities are also reporting painfully high rates. The number of metro areas with unemployment rates above 10 percent fell to 47 from 70.
- The Commerce Department said American incomes rose 2.6 percent last month. That was the biggest increase since December 2004 and well above analysts’ expectations for a 0.8 percent gain.
- After-tax income climbed 2.7 percent in December, the strongest since May 2008, while consumer spending rose 0.2 percent, just below the pace expected by analysts in a Reuters poll.
Although the above data is positive, it is by no means excellent. It shows modest improvement, but it also furthers the perception of the market that the US economy is sluggish. Perception is key here, as it is always with the market. Until the market gets some strongly positive news about the US economy, or earnings take a turn for the worse, expect further sluggishness in the near term.
After a period of indulgence, we all know the feeling of sluggishness. Motivation to get up and do something does not come easily. It can be hard to move, to do anything other than the basics, minor movement back and forth, here and there. We lose interest until something happens that inspires us or scares us into action. Yup, this is where the market is these days. It senses it has swallowed a bit too much a bit too fast, so it is slowing down. That is healthy, and to be expected, but something needs to happen to motivate it to real movement. Maybe it is the payroll report coming tomorrow.
Trade in the day; Invest in your life …
