Thursday, March 10, 2011

Bad news doesn't matter until it does

Wow, markets are taking it on the chin this morning after some slightly negative news. Initial claims were up, China's economy seems to be slowing and our trade deficit was a little higher than expected, but over the past 2 years the market has shrugged off every one of these little news items. Things to keep in mind:

* The Middle East is still simmering. Oil is pulling back a little today, but remember Fridays have been very volatile after Friday prayers.

* Technical analysts are seriously sweating the 1300 level in the S&P 500. If it breaks through (and holds below 1300) the next stop on their charts is almost 10% lower. I don't subscribe to this thinking but many people do so we have to be aware of it.

* GM's CFO is resigning and GM's stock is now solidly below their $33 IPO price. A slowdown in China would have a huge impact on GM. The old saying was "What's good for GM is good for the US." The new saying should be "What's good for China is good for GM."

* The most staggering data point from the Initial claims report was that the number of people on unemployment fell from 9.24 million to 8.77 million a decline of nearly 440k people in a week. Did they all get jobs last week? This seems highly unlikely, but with nearly 150k people coming off the extended unemployment rolls I'd guess it's simply a matter of benefits running out (remember the worst of the recession was around 99-100 weeks ago - Feb 2009 -and those that have had 99 weeks of benefits are now coming off the unemployment rolls). Maybe there is a correlation between the spike in local bank robberies and the expiration of unemployment benefits?

* The most comical data point of the day comes from the US/China trade statistics. China says their US surplus was $13.6 billion (they sent $13.6 billion more of goods and service to the US than they bought) but the US says our trade deficit with China was $23.3 billion. That's a pretty interesting spread.


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