Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
After falling to negative in premarket on weekly claims, the market is now up sharply with a lot of the pro cyclical stocks leading the charge (metals and global companies). Those were the hardest hit of late. While I was expecting dovish commentary out of lieutenant #1 Yellen last nite, it instead was some dovish commentary by lieutenant #2 NY Fed Prez Dudley which seems to be stoking markets. (Along with hopes of good Chinese GDP tonight) Nothing direct mind you, but the market is “reading between the lines” here on bearish commentary on the economy from the all important NY Fed head (this is where Geithner was once stationed). Again it stinks that this entire market now is predicated on reading tea leaves from Fed officials, but this is what we’re stuck with in a market drunk on liquidity injections.
The spasm upward we just had this morning now has the S&P 500 within sniffing distance of that long term trend line I mentioned this morning
Some of the comments which are making traders happy below – remembering of course when key Fed officials say bad things about the economy it is “good” … and vice versa (i.e. the FOMC minutes last week):
“Regardless of the importance of the mild winter in distorting the recent economic data, real economic activity has yet to be strong enough on a sustained basis to make a big dent in the overall amount of slack in the U.S. economy. While growth was stronger in the fourth quarter, most of it was due to inventory accumulation. Growth of final sales remained quite weak. Historically, quarters in which inventory investment makes significant growth contributions are typically followed by quarters in which that growth contribution is modest or even negative. That appears to be what is shaping up for the first quarter of this year…..To put the recent pace of growth into perspective, we believe that the economy’s long-run sustainable growth rate—what economists call the potential growth rate—is around a 2 ¼ percent annual rate. We need sustained growth above that rate to absorb the still substantial amount of unused productive capacity. Thus, our recent growth rates are barely keeping up with our potential.
Even though the unemployment rate has declined sharply from 9 percent last September to 8.2 percent in March, it is still unacceptably high. In addition, many other measures of the labor market remain weak. The labor force participation rate, the percentage of people employed, and the total number of hours worked in the economy all dropped sharply during the recession and remain well below their pre-recession levels, even taking into account the impact of demographic shifts. Also, it appears that productivity growth has slumped recently. Although that means that a given amount of growth translates into bigger employment gains, it certainly is not an unmitigated positive development.”
hat tip to The Stock Sage
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
