Sensible Investing

Good News Continues, but Market Stalls

November 6, 2009

Good news on economy continue rolling along. Here’s a summary for the last week or so:

- Q3 GDP grew at 3.5%, so now the recession is finally officially over.
- Retail sales were better than expected.
- Auto manufactures, such as Ford, Nissan, Toyota reported (relatively) good results with sales higher than a year ago. Ford reported $1.8B profit. Apparently, it is still possible to make money in the auto business.
- Job cuts by employers are moderating, and unemployment claims are falling. In fact, more employers are planning to add jobs than ones planning to eliminate them.
- The housing market continues its recovery. Pending home sales rose by 6.1% and are now at its highest level in three years.
- Earnings reports continue upward trend of the last two quarters. Fully 80% of companies beat earnings estimates, which is a record.

Note that consumer spending and unemployment have been thorns in this recovery for quite some time. As you can see, now we are getting more and more positive news for both.

The market, in its infinite wisdom, decided to greet these news with a sell-off earlier this week, and continued high volatility later. One could argue that a consolidation is due after a rally we had, or this could be a case of “buy on rumor, sell on news”. In any event, markets can be quite irrational in the short term, but in the long term, it is the fundamentals and earnings that matter.

Entry Filed under: Market Conditions. .