Industrial Production, NAHB Sentiment Up; QE3 Bets Decrease As Rangebound Trading Continues, Is That A Good Thing?
Traders stuck to the sidelines after getting mixed signals about the U.S. economy and the likelihood of QE3 this week. Retail sales numbers were up yesterday along with good news from Home Depot, but some short sellers remained firm on their strategy (which hasn’t really been working yet). The data released yesterday suggest the economy is weak but after an increase in jobs last month of 163,000 traders are speculating that the economy could be sluggish, but not ready for Fed stimulus at the Jackson Hole meeting next month.
Target confirmed today that shoppers could be in spend mode after they revealed strong earnings which sent the stock up sharply in the early part of the session but some of this growth is due to early back-to-school shopping in a season that starts earlier this year.
Industrial Production Up, NAHB Sentiment Hits 5-Year High
Industrial production increased for the month of July 2012 and this confirmed predictions that the economy won’t double dip although it didn’t bring too many analysts into the economy-is-much-better camp. The homebuilder sentiment reading from the NAHB was another positive data point today as it climbed to 37 which is a 5-year high.
Can An Economy Put Replace The Bernanke Put?
Although investors like monetary easing when the economy contracts, it’s hard to argue they prefer it to an expansion. For some, the good economic data makes it a win-win situation even if the Fed doesn’t ease. If easing is unlikely, a true economy-put might replace the ‘Bernanke put’ which is a bigger positive for longer term investing. We are neutral on equities with a positive bias but a tumbling jobless claims number could change our view which seems unlikely. Our preliminary evidence shows the jobs market may be getting a bit less mixed and more positive after trends from last month. Extremely weak earnings form Cisco would change our view since Apple, McDonalds and others firms posted lackluster earnings results for the second quarter.
