The headline news today is jobless claims rise, home sales fall, economic leading indicators soften, and Chairman Bernanke tells Congress to keep the stimulus spigot open to avoid a harsh setback in our recovery. These are the top news items today, yet as I write, the DIJA is trading above 200 on the plus side. So what gives? What changed today from yesterday, aside from the not-so-good news today? Here’s what gives …
Stocks surged Thursday after another strong batch of earnings reports revived optimism about the economic recovery. Encouraging signs of growth in Europe added to the upbeat mood.
Strong PMI numbers (manufacturing) from Europe and blockbuster earnings reports from Caterpillar, UPS, and Union Pacific are the true economic stories of the day. So, once again, the Bear’s hope for a double-dip recession are dashed against the rocks of a continuing global economic recovery, and that recovery is centered in Asia with Europe providing support.
Here’s our problem folks. The economies of China, Germany, France, and Britain are small compared to the U.S economy, so shifting those economies is much quicker than moving the behemoth economy of the U.S. Consequently, these economic powers can remove stimulus spending as their economies improve, and the adverse results are minimal. The U.S does not have this luxury. We have lost our manufacturing base and so our growth in GDP is dependent on consumer spending, and, as we all know, consumer confidence and consumer spending have not fully rebounded from the crash of 2008. This is the reason for our stubborn unemployment rate. When consumers don’t buy, people don’t work, and visa-versa.
The real and inspiring news is Caterpillar, UPS, and Union Pacific. Caterpillar is supplying heavy equipment to Asia’s economic development and the other two are moving product in large numbers.
Shipper United Parcel Service Inc and U.S. railroad Union Pacific Corp topped Wall Street’s expectations when they reported quarterly results as both captured increases in domestic shipping volume… The numbers posted on Thursday by the world’s largest package delivery company and the United States’ No. 1 railroad reflect a slightly more optimistic U.S. economic environment, but consumers have yet to participate fully in the recovery …
Okay, logically, if American corporations are earning money, and products are shipping domestically and overseas, can the American consumer be far behind? If business is ramping up spending on rebuilding inventories and replacing out-dated technology, can the jobs be far behind? The answer is not so simple because consumer confidence is the big issue. However, take heart because business in America is showing solid earnings and confidence about the next two quarters. Maybe, just maybe, American businesses will start spending some of the $1.8 trillion of cash on their books. Maybe, just maybe, if they do, jobs will come again, and the U.S. consumer will simultaneously loosen the purse strings. Imagine that pretty picture …
Trade in the day; invest in your life …
