They say it’s the stronger dollar but don’t kid yourself. The stock market has run too far too fast. Today, investors are all of a sudden worried that the stock prices rise might be overdone. Huh? It has been overdone for about 1-2 months already!
With interest rates rising and the housing market in limbo, the S&P managed to rise as much as 40% from the early March bottom. The reason? Over optimism that the recovery is in place.
Just look at the New York Federal Reserve Empire State Manufacturing Survey index. It feel 5 points in June to a negative 9.4. Negative! It may look better but no one is buying. I was at the mall last weekend and although traffic was picking up, no one was lining up at the stores. People may be looking but they aren’t buying.
In the meantime, the dollar is rallying, sending the only trade that worked, the commodities trade, diving. Freeport McMoran (FCX) is down another 4.5% to 55.92 after Friday’s 4% pull back. Oil is down below $72 as well.
If you haven’t been selling into the rally these last few weeks, you are trading wrong.
As of writing, the Dow is down 207 points. It looks like the choppy trading will continue, until we get a positive (or negative) catalyst that will push the market one way or another.
It’s hard to tell why the U.S. consumer is so confident when unemployment continues to rise and home values continue to shrink. However, the U.S. consumer sentiment is at its strongest level in nine months, just below the levels in September 2008.
Remember that during that time in 2008, Lehman Brothers went bankrupt and sent the world financial, and thus economies into a big mess. To think that consumers feel almost as good now as they did before the collapse is insane. Yet, this is what the numbers are telling us.
What’s even more interesting is that the index still came in under expectation. Economist on average was expecting a reading of 69.5 even though the index came in at 69.0. Fortunately, the number is still up from May’s reading of 68.5 so while the market dove immediately after the report came out, it’s paired back much of its gains.
Not all is crazy though. People are worried about the economic outlook and isn’t totally drunk in kool aid. The consumers’ assessment of the economic outlook for the next year fell from a gauge of 61 from 75.
Also, everyone is expecting inflation to come. The one-year inflation expectation rose to 3.1%, the highest level since October of last year.
We lost a lot of our wealth and now inflation is back. Awesome!
source https://www.stockmarket.today/news/stocks-look-overheated-and-consumer-confidence-varies/
