Optimistic Bulls Rally Wall Street
It’s a new month, and bulls are optimistic. Starting off a normally slow month with a rather enthusiastic stock market rally, the bulls are trying to take early control as news remains better than expected. Indeed, there’s all sorts of “good” news. (“Good” news in the current climate means that things aren’t as bad as the forecasters thought they would be at this point.)
Here are some of the things that are contributing to the enthusiasm on Wall Street:
- Manufacturing: While the index remains below the important 50 mark, the pictur is becoming “less ugly”. Worldwide, manufacturing is picking up in the hopes that the recession is over.
- GDP: Last week’s GDP numbers came in showing a 1% contraction in second quarter economic growth — instead of the expected 1.5%. This means that economic growth may soon start picking up.
- New Home Sales: Sales of new homes jumped in June, prompted by low prices and mortgage rates. There are hopes that the housing bottom may be approaching, if it hasn’t already passed.
- Ford: Ford reported higher than expected sales data. The company said that Cash for Clunkers has helped sales, and that things in general appear to be improving.
Of course, the real question is whether Wall Street is being too enthusiastic right now. There are questions about underlying fundamentals, as well as concern about whether this rally will last. While the news looks good right now, there are still worries about the employment picture and about home prices. While sales may be up, there are some analysts that think that prices have yet to hit a bottom.
Additionally, the labor picture is going to continue to drag on the economy. Cutting jobs may be good for earnings reports for the big companies, but it sure doesn’t do any favors for consumer spending — which accounts for 2/3 of economic activity.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
[...] stock market rally, along with the fact that the market is gaining on the year, has many people wondering if now might [...]