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Courtesy of David Brown, Chief Market Strategist, Sabrient
So, what does the market want?
Well, for one thing it wanted the European Union to bail out Greece, and that’s what it got this morning. The S&P 500 responded by gapping up 13 points from Friday’s close.
Then — Bam! Bam! Bam! — it was hit with three negative economic reports on top of the dismal picture painted by last week’s reports, and so it tumbled back almost to where it ended on Friday.
Then it seemed to say “What? Me worry?” and roared ahead, with the three major indices — the S&P 500, the Dow, and the Nasdaq — all closing up more than +1%. The S&P 500 started the day about level with its 50-day moving average and ended up well above both its 50-day and 30-day MAs.
The S&P 500 Index
Granted, the bailout of Greece strengthened the euro, which weakened the dollar and aided the market’s rally, as did the strong increase in oil prices. For those keeping track, oil was up about 3% last week, while the dollar was down about 2%.
Just to prove further that the market is fearless, the VIX was down about 2% last week, although it was up a bit today.
So what was all the bad news the market ignored?
Today it ignored bad housing numbers, worsening business conditions, and growing pessimism among consumers. The S&P Case-Shiller report confirmed last week’s bad housing numbers, leading many to say that the housing market indeed faces a double-dip recession. Worse was the Chicago PMI report on the business climate. While it held above the magic “50 mark,” it fell to 56.6 from last month’s 67.6 and the expected 63; and the consumer confidence index dropped to 60.8 versus last month’s 66 and the expected 66.5.
The market accepted all this with equanimity, just as it did last week when the pending home sales index fell 11 points, eclipsing the rise in new home sales. Durable goods added to the week’s bad news, falling to -3.6% from last month’s +4.4% (-3.3% was expected). Even excluding transportation, durable goods was off -1.5%. Inital jobless claims messed with us again last week, coming in at 424K vs. an expected 400K and the previous week’s…
