Courtesy of John Nyaradi
One can only marvel at the velocity and volatility of moves this week in global markets. As we said on our weekend update, the only sound advice in this environment is “fasten your seatbelts.”
Markets soared today on the strength of the January ISM report which jumped to 60.8 from 58.5 prior and so put in the best number in nearly 7 years as U.S. manufacturing activity showed continued strength.
The cloud in the silver lining was the prices paid index which jumped to 81.5 from 72.5 in December and is a portent for possible future inflation ahead as input prices to manufacturing rise.
Overseas, the Egyptian crisis entered a new phase as President Mubarak announced he wouldn’t seek reelection which was widely seen as positive except by many Egyptians who want him gone immediately.
To date, the Suez Canal and the nearby vital SUMED pipeline have remained open, however, Brent Crude jumped to a two year peak of $102 over continued concerns of the security of the oil supply as major disruptions were reported in the important ports of Alexandria and Damietta.
And today the Middle East “contagion” spread to Israel’s eastern neighbor, Jordan, where riots over rising food prices caused the King to replace his Prime Minister in what is becoming a standard ritual across the Southern Mediterranean.
Now Israel is surrounded by unstable political situations in Egypt on the West and Jordan on the East.
Nevertheless, the Dow closed above 12,000 for the first time since June, 2008, and retail investors appeared to have returned to the market according to volumes recorded by major online brokerages. Of course, it’s well documented that retail investors tend to get in at tops and out at bottoms, and so it remains to be seen if this new found optimism is well founded.
Lost almost unnoticed in all of the euphoria was the December Construction Spending report that showed a steep decline of -2.5% over December’s -0.2%, which places activity in this all important sector at the lowest levels in nearly eleven years.
No matter how you slice it, these are crazy times, indeed. Expect more volatility ahead as economic reports continue to pour in this week with Challenger Job Cuts and ADP Employment just ahead before market open on Wednesdy. Wall Street Sector Selector remains in “Yellow Flag” mode, expecting choppy prices ahead.
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.
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