This morning, I was reading one of my many daily market updates. The top article that caught my eye was the one that said, “Oil faces bearish technicals, looking at $80.” At first, I thought that would be good to write about today in relation to the good news about jobs and the service sector, but then I looked at the price of oil. It too, like the overall market, liked the news that came out and instead of rolling back toward $80, it crossed the $90 level. By the way, the news, if you have not heard, suggests the economy has hit bottom in its recent soft patch and is now looking to turn up in its cycle, the same thing it did in the fall of 2009, 2010, and 2011.
- US service firms grew at slightly faster pace in July, index reading edges up to 52.6.
- The new unemployment numbers show that private employers added 163,000 jobs in July, the best pace of hiring in five months.
I understand that one good report or two does not a turnaround make. But when one combines today’s data with other recent data – the rise in US consumer confidence, the earnings from Caterpillar and Union Pacific Railroad, the remarks about the US and global economy from the CEOs of those bellwether companies, the uptick in the US housing construction, the uptick in the median price of US homes, the rise in real estate activity in most regions of the US, and the soft landing in China – one can reasonably conclude that history will repeat itself. I believe the economy and the market will turn up this fall.
True, the US economy and market face one more confidence-shattering potential -the fiscal cliff. My suspicion is, however, with Congress’ approval rating sitting at all-time lows, and with the elections just around the corner, the politicians will accommodate that and come to some resolution at best. At worst, they will not make waves about it, instead leaving it to the lame duck Congress to figure out.
And the global economy faces a rather large challenge as well – Europe’s economy is in contraction. However, if the US and Chinese economies are, in fact, turning up, this will help Europe, as will the coming move by the ECB and the other powers to shore up the financial situation there. That will go a long way to restoring both business and consumer confidence on the continent, which, as everyone knows, is the key to economic recovery.
“The biggest problem for our country is that we owe a great deal and we must repay that money and, right now, it’s very difficult that anyone would lend to us, or would refinance the debts that we have,” Spain’s Prime Minister Rajoy said.
The above is a clear signal that the conditions for the ECB “bailout’ Mario Draghi set forth will be fulfilled – the countries that will get the bailout need to ask for the bailout. Spain will swallow its pride and ask, which means they will tow the mark in reducing their deficits.
I have a final thought, which is neither pretty nor pleasant, but I am compelled to reference it, as it is something that should concern us all. Computers are not infallible – humans make mistakes.
The software glitch that cost Knight Capital Group $440 million in just 45 minutes reveals the deep fault lines in stock markets that are increasingly dominated by sophisticated high-speed trading systems.
Trade in the day; Invest in your life …
