8/7/2012
By Carlos Guillen

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Equity markets are continuing to rise despite the lack of macroeconomic data and significant earnings releases, but it's all good and lovely. Even European markets have been up nicely today in spite of economic data that showed a decline in manufacturing in Italy, U.K., and Germany. While it is difficult to pin the reason for today's positive market action, one can certainly make the case that central banks in the U.S., China, and in Europe have done a great job in restoring confidence as they have made it clear that they stand ready to act if need be.

European market action today is very encouraging in that despite news that Italian real GDP fell 0.7 percent in the second quarter, all markets are up. There was actually more bad economic data: Italian industrial production in June fell 1.4 percent; German manufacturing orders fell 1.7 percent; and U.K. industrial production fell 2.5 percent that month as well.

Perhaps a bit encouraging today was the Job Openings and Labor Turnover Summary, or JOLTS report, which gave some hope of improving prospects in the jobs market. The highlight of the report was that the number of available jobs in the U.S. jumped in June to near a three-year high, providing some evidence that the jobs situation may be heading in the right direction. The number of job openings in June was 3.76 million, up from the 3.66 million reached in February and representing the highest since July 2008 when it was 3.79 million. At the moment the number of job openings still remain well below the 4.26 million openings when the recession began in December 2007; however, the number of job openings has increased 57.3 percent since the end of the recession in June 2009. Among the largest gainers were Professional and Business Services and Education and Health Services. The uptick in openings is certainly serving to give some hope that employers may be expanding, which in turn may help boost consumer spending. Hiring decreased by 100,000 to 4.36 million and firings decreased to 1.81 million from the 1.96 million posted in May. This data comes after Friday's rather encouraging jobs number that brought a better than expected increase in nonfarm jobs of 163,000 in July, but an unemployment rate of 8.3 percent, up from 8.2 percent.

In all, despite the lack of data, we remain cautiously optimistic about the short run in equities. The rest of the week should bring more in terms of concrete data to analyze that should at least give more indications of the direction of the economy, which sometimes does not correlate with equities.

Carlos Guillen
Wall Street Strategies