Monday Afternoon Cheat Sheet: 3 Stories That Moved Markets
The U.S. equity markets tripped over Friday’s rally and finished the day with a black eye. A weaker-than-expected manufacturing report compounded the negative impact of growing political tension in Europe, and the markets
At the close: DJIA: -0.93%, S&P 500: -1.15%, NASDAQ: -1.51%.
1) The Factory Orders Report released by the U.S. Department of Commerce on Monday was packed with useful economic information. The report is a tool that investors can use to develop their understanding of the economic environment against which they have to make investment decisions. If all the indicators say growth, then the rotation into equities make sense as corporate profits are bound to rise. If all the indicators say sluggishness, then the bond market gets a lot of attention.
Overall, new orders for manufactured goods increased 1.8 percent in December to $484 billion. This is below estimates for 2.4 percent growth, but a marked improvement over November’s 0.3 percent contraction… (Read more.)
2) Considering the strong start to the year for equities, Ben Bernanke’s smile must be getting as big as the Federal Reserve’s balance sheet. The Fed Chairman is on record defending the wealth effect, which involves forcing investors into equities by punishing them through record low interest rates and quantitative easing. After an early lackluster reception from the latest QE announcements, Mr. Market is feeling quite optimistic these days.
But Main Street isn’t necessarily riding the same high. The Dow at 14,000 today is a much different picture than in 2007. The headline unemployment rate in October 2007 was 4.7 percent, compared to 7.9 percent today. The latest data from the United States Department of Agriculture shows that nearly 48 million Americans are now on food stamps, compared to roughly 27 million in 2007… (Read more.)
3) If the U.S. equity markets look like they took a beating today, take a second to see what happened in Europe. London’s FTSE 100 closed down 1.58 percent, Germany’s DAX lost 2.49 percent, and the STOXX 50, an index of Europe’s leading Blue-chip companies, fell 3.13 percent, and the cross-Atlantic declines are not entirely unrelated.
Political tension in Spain and Italy, two large and struggling economies, has cast a pall of uncertainty over the markets. A change in pro-austerity leadership in both countries threatens to undermine the efforts of European finance minsters and international creditors to keep the euro strong and the region’s economy on the road to recovery… (Read more.)