I am not sure where to begin this morning, but I guess the place best for me is with the following headline from yesterday.
- Fed Officials Said Job Gains May Bring Faster Interest-Rate Rise
That headline should have spooked the market and it did, but as quickly as the market dove yesterday, it came back up.
- U.S. stock prices trimmed gains after the release of the minutes but quickly recovered the lost ground. At the same time, the U.S. dollar firmed against major currencies and yields for 10-year Treasury notes moved higher.
I suppose it could have been the Fed notes are open to interpretation, as we see here in the news excerpt below.
- The Federal Reserve has been surprised by how quickly the U.S. labor market is healing but doesn’t want to bring forward a planned rate hike until the recovery looks more convincing, according to minutes of its last policy meeting.
Is the Fed going to push rates higher sooner or is the Fed going to sit tight until it feels better about the US employment situation? No matter, the point I made yesterday and have made before, the issue of the Fed is a non-issue. It is all baked into the cake, so to speak. The market is now, and it should be, hooked on the fundamentals and my-oh-my are they ever coming in better and better.
Along with a sharp drop in unemployment claims, a downward trend in continuing claims, an uptick in existing home sales, a surge in the Philly Fed index, and a sizeable jump in the Markit Flash PMI reading, and earnings coming in better than expected, we have the Leading Economic Indicators Survey producing …
- The LEI improved sharply in July, suggesting that the economy is gaining traction and growth should continue at a strong pace for the remainder of the year. Although housing has been one of the weakest components this year [not as of now], the sharp gain in building permits helped boost the LEI in July. Financial markets and labor market conditions have also supported recent gains, but business spending indicators remain soft and their contribution marginal.
Okay, so business is not completely on board, but it will be in order to remain competitive. Oh, as to weakness in the housing market mentioned above, and to business spending, perhaps, we have the following piece of data.
- The last three months have shown steadily increasing demand for design services and the Architecture Billings Index (ABI) is now at its highest level since 2007.
After the down market days since June 24th, after the breathless media generating fear about Ukraine/Russia, Gaza, and Iraq, after the talking heads and celebrity analysts warned us about earnings, about those same folks old us how the S&P was overvalued with a high P/E, after all of this, the Dow today rose above 17,000 again, almost back to where it was before the rebalancing began in June.
On the whole, the road is clear, the car is revved up, and the drivers are looking forward. So, where do you think we go from here?
Trade in the day; invest in your life …
