U.S. stocks hit their May mini-crash closing-price low on May 26. At that point, various technical and investor-sentiment indicators we follow were at their worst levels since the bear-market low of March 2009. In other words, the sharp sell-off wiped out a lot of investor optimism, theoretically setting the stage for a new market advance. Since then, the market has been working to build a new base.
As you know, the level of anxiety is high. But the global recovery is proceeding despite Europe’s debt woes, worries that China’s economy will slow and numerous geopolitical problems. Despite fears that Europe's debt crisis will hurt the U.S. economy, the evidence is that the recovery here is continuing, albeit at a modest level. For example, the Institute for Supply Management’s index of non-manufacturing businesses, which makes up almost 90 percent of the economy, held at 55.4 in May for a third straight month. Readings above 50 signal expansion. Credit conditions evidently are improving too. Consumer-loan delinquency rates are dropping, based on recent reports from Bank of America and American Express. We hope this will lead to less restrictive lending and more new loans.
Tomorrow will bring the U.S. Labor Department’s jobs report for May. This monthly report arguably is the most important of the many economic numbers.Read more...
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