Well, ain’t this just a fine morning? The market is following through on yesterday’s romp through the green. Yesterday, though, I wrote the reasons for the romp were unclear. Today I have a better sense of what is driving the market forward. Hope is one thing. Amid signs of political movement, the market hopes European politicians are moving toward a long-term solution to the debt crisis. On top of this, there is renewed hope that Spain will get through its near-term debt issues.
The Spanish Treasury sold about 2.1 billion euros, or $2.6 billion, of bonds, slightly more than planned, after demand proved unexpectedly strong. The auction included 10-year debt, priced to yield 6.04 percent.
My sense, though, is the market also is tuning into the reality that the US economy is not moribund, and Ben Bernanke’s words to that effect yesterday, and his assurance that the Fed will step in if needed, soothed the market.
Chairman Ben Bernanke says the Federal Reserve is prepared to take further steps if the U.S. economy weakens, but he didn’t signal any action is imminent.
I believe as well the weekly unemployment data is helping the market feel better about the US economy. The data suggests the recent downturn in hiring may be easing.
The number of Americans seeking unemployment aid falls to 377,000, sign of stable job market.
And let’s not forget about the Fed’s “Beige Book” that came out yesterday. In that survey, the Fed found economic growth in all but one of its 12 regions, as well as a number of other indicators that point to what I have been preaching for some time now – the media hype about the declining economy is just that, hype.
Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from early April to late May. Activity in the New York, Cleveland, Atlanta, Chicago, Kansas City, Dallas, and San Francisco Districts was characterized as growing at a moderate pace, while the Richmond, St. Louis, and Minneapolis Districts noted modest growth. Boston reported steady growth, and the Philadelphia District indicated that the pace of expansion had slowed slightly since the previous Beige Book.
The market might also be digesting the news below, as it, along with lower energy prices globally, points to more consumer spending on a global scale.
World food prices dropped in May for a second month in a row, hit by steep falls in dairy products, sugar and other commodities, and are likely to fall further in the coming months.
Finally, the market has to like that China is now turning toward stimulating its economy, the next phase in their plan to curb excessive growth and to tame high inflation.
China’s central bank cut benchmark interest rates by 25 basis points on Thursday in a surprise move to shore up slackening economic growth, its first rate cut since the depths of the 2008/09 financial crisis.
Yup, I think the market just might be coming around to my thinking. Now, if Iran, US politicians, and Europe will cooperate, the market could heat up quickly …
Trade in the day; Invest in your life
