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Circus Market Cheers Depressing Data
The market can be so funny at times, and the past couple of days have seen sessions where bad news is good. With chatter buzzing about potential central banking action around the world, there's nothing like a fresh batch of awful economic data to spur QE hopes. We noted on Thursday morning that the jump in initial jobless claims to 386k from 380k was met with an up-tick in market futures. And then later that day there were murmurs from the G-20 that world central banks were discussing coordinated intervention... if necessary; so now investors are primed for action. That means the worse the news is, seemingly the better.
Well, Thursday brought another dose of awful data and as a result the market is psyched. Investors were served up a real prime scoop of disappointment with the release of industrial production numbers for May which fell by 0.1% versus expectations of a 0.1% gain. Production is now down in two of the last three months. The "best" thing about this production report is that it comes from the horse's mouth itself: the Federal Reserve. This report came in conjunction with a poor Empire State manufacturing index (from the New York Fed) that was down to a reading of 2.29 from 13.8.
And then the Dow picked up another 30 points immediately following the release of the University of Michigan Sentiment index, which fell to 74.1 from 79.3, the lowest level since February. Alarmingly, the consensus was looking for 77.5, and this was the biggest miss versus expectations since February 2006. So then, as far as the market is concerned, this means it's time to pop the champagne!
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