It wasn’t a straight road, but the Dow managed to stagger to its 7th higher close in a row yesterday, although only by the slightest of margins.
Wall Street seemed to be enamored by and only focused on Intel’s bullishness by totally disregarding other economic news, which indicated anything but a continued recovery in the second half of the year.
First, retail sales for June fell 0.5% igniting concerns that an economic slowdown is a real possibility. Second, this fact was supported by the normally upbeat Federal Reserve cheerleaders, issuing a reduced second half growth forecast. Maybe some reality has set in as the Fed minced no words by stating that it might take as many as six years for the economy to recover fully from the recession:
The long recovery would be the result of “firms’ caution in hiring and spending in light of the considerable uncertainty regarding the economic outlook, by households’ focus on repairing balance sheets weakened by equity and house price declines, and by tight credit conditions for small businesses and households.”
This is about as negative of a Fed statement as I have ever seen. Nevertheless, traders on Wall Street seemed to simply ignore the downbeat Fed announcement and pushed the major indexes off their lows.
The S&P; 500’s early assault on the 1,100 level failed again, but a late day rebound cut losses and moved us back to the unchanged line for the day. Again, the number to watch is around 1,111, which represents the S&P;’s 200-day moving average. Once that point is clearly pierced, more buying and higher volume is likely to materialize.
I found it astounding that the markets ignored the usually closely watched Fed remarks. We have to wait and see if other positive earnings reports can jump start a new bull run in the face of a weakening economy. If so, it may very well be a short-lived one.