The market today is acting rather sedate after two days of losing steam. To my vision, this behavior is expected. Given the sudden rush to the top, smashing all ceilings and building new floors, it is apparent the market needed some time to completely digest the new levels, and it took that time with two days of selling off. It is now closer to “right.”
Yet, today’s US economic news came out soft, so one would expect the market to see trouble down the road and it would continue to sell off, but it is not, at least not yet.
New factory orders fell yet again, signaling some weakness in US manufacturing and unemployment claims rose to the highest level since May. By the way, the May levels were pretty good and the heavy winter back east has to be taking its toll. So, the unemployment numbers are irrelevant right now, as are the manufacturing numbers.
The US economy has been on a roll for some time now. Factory orders, and manufacturing in general, do not play the role they once did in the US GDP, so the drop means less than it used to mean. Now, the place to look for both employment and contribution to the GDP is the Services sector, which comprises some 70-75% of all workers in the US.
- A gauge of growth in the U.S. services sector was modestly stronger than expected in February, helped as an index on employment rebounded from recent weakness.
This is not to say manufacturing is not important, or that it is not a signal to watch. It is both, but right now it is less important to the US economy than the Services sector, in terms of the market future. What is more important to the market than anything in the US economic data right now, though, and what plays in the hand for US manufacturing down the road is what is happening in Europe and in Japan.
- The European Central Bank said it will start printing money to buy bonds next Monday and delivered a robust economic outlook that will make it hard to extend the plan beyond its envisaged Sept. 2016 end-date.
- Japanese share prices ticked up on Thursday despite softness in Wall Street shares the previous day helped by optimism on the Japanese economy and bolstered by the Bank of Japan’s buying earlier this week.
Both Japan and Europe are getting stimulated and both are showing signs of liking it. These two giants in the global economy will change the current status of US manufacturing once the consumers “over there” begin spending money again, and that will happen just as it happened here in the US after QE began. So, wait for the results, but get your money in now, or last week, or last month.
- European shares rose on Thursday, with a batch of robust company results from firms including supermarket Carrefour and fund manager Schroders boosting sentiment.
Forget about Greece and forget about Ukraine. The former is unimportant and is on track to simply do what it has been doing – paying its bills and now with a little help from its friends.
- The European Central Bank will resume normal lending to Greek banks only when it sees Athens is complying with its bailout program and is on track to receive a favorable review, ECB President Mario Draghi said on Thursday.
The latter, which is important (think sanctions between Europe and Russia) is coming to some strategic resolution that somehow will allow Putin to reign in the dogs and turn his attention to his beleaguered country.
- Now that the rebels have consolidated their area of control, one operational phase of the game seems to have concluded. Putin bought time for the rebels to take Debaltseve. With the rebels having secured a position of strength on the ground, the ceasefire can now be enforced.
So much bull dung in this idea that killing people is okay to achieve your political aims. I guess the world is not changing in this regard. In fact, with the newest piece of dung out there killing innocent people to achieve its goal, the world is even uglier. Yet, there might be some hope that the crap is getting pushed back.
- Islamic State militants have set fire to oil wells northeast of the city of Tikrit to obstruct an assault by Shi’ite militiamen and Iraqi soldiers trying to drive them from the Sunni Muslim city and surrounding towns.
If you remember, all the way back to the first Gulf War, when Saddam Hussein was pushed out of Kuwait, he used this same tactic of burning the oil wells to hide his retreat. It did not work then and it won’t work now. These savages have pissed off too many people (many of them Muslim) with their barbarism and cruelty.
In any case, the market is dissolving now, heading toward the red for today, but it is still early and it is still somewhat unclear as to how good the future will actually be.
Trade in the day; invest in your life …
