Stocks, led by the Russell 2000, surged yesterday amid better than expected earnings and data suggesting stronger economies from the US to Europe to China.
Domestically, fewer American filed applications for unemployment benefits over the past month than at any time in 14 years while the Index of Leading Economic Indicators (LEI) rose by 0.8%, a rise consistent with 3.0% GDP growth.
Is the economy on the verge of “escape velocity,” the illusive proverbial inflection point where economic growth is sustainable? Many times it appears that the economy is at this juncture, only to disappoint.
Regarding global growth, in my view broad based conclusions are made from single data points, data points that can be inconsistent or can suggest a mis leading environment. A week ago the global economies were slowing too much and today they are expanding. It is impossible for global economies to change so radically so quickly.
If this was indeed the case all should be petrified about monetary policy and interest rates as both relate to inflation.
What can change radically on a moment’s basis is sentiment, sentiment perhaps amplified by the machines dominating trading.
What will happen today? Equities reversed some of their gains in late afternoon following unconfirmed reports of Ebola in NYC, a healthcare worker who left Western Africa about 3 weeks ago.
Last night the foreign markets were down. London was down 0.30%, Paris down 0.52% and Frankfurt down 0.39%. Japan was up 1.10% and Hang Sang down 0.13%.
The Dow should open nominally lower on a high profile earnings disappointment. The S & P is on pace for the first weekly gain in five. The 10-year is up 5/32 to yield 2.45%.
