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Nick Godt's Market Medics
April 8, 2010, 3:39 a.m. EDT · Recommend (2) · Post:
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Curbed enthusiasm for stocks
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GM gets ready to exit rehab
By Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- "Hope at last," reads the cover of the conservative British weekly The Economist, which features a 14-page report on the rebalancing of the U.S. economy, illustrated by a rainbow emanating from an American flag.
Contrarian investors typically prefer to use the cover of U.S. weekly Time Magazine as evidence that a trend is near its apex. But this week, Time features Apple /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 240.60, +1.06, +0.44%) CEO Steve Jobs on the launch of the iPad. Who'd want to bet against that?
Economists disagree on whether the recent recession was really "The Great Recession." But WSJ's David Wessel says given its depth, duration and legacy, it lives up to the name.
At the very least, as The Economist cover suggests, some degree of optimism about the U.S. economy has finally resurfaced.
Hard to use this mixed endorsement as a clear sign yet that stocks -- which have been discounting some kind of a recovery as part of their 75% rally since March 2009 -- have overshot by a wide margin.
As long as employment and the economic numbers continue to improve, the stock market should continue its grinding march higher.
But as Wednesday's action on Wall Street served to remind, even timid signs of recovery are quick to elicit calls for somebody somewhere to start paying the bills for the monetary and fiscal rescues engineered by global central banks and governments over the past two and a half years.
As concerns about Greece's ability to finance its debt resurfaced Wednesday, gold reached its highest level this year and stocks posted their biggest drop in a month.
After nearing the 11,000 magic mark earlier this week, the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 10,898, -72.47, -0.66%) fell 72 points, or 0.7%, to end at 10,897. The S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,182, -6.99, -0.59%) fell 0.6%, while the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,431, -5.65, -0.23%) dropped 0.2%.
It didn't help that Thomas Hoenig, the hawkish president of the Kansas City Federal Reserve, repeated his dissenting view that interest rates should rise sooner than later to prevent inflation from rising.
Before he spoke, however, stocks were also hit by a report that showed U.S. consumers have been busy paying down their debt, and are therefore not borrowing any more to finance purchases.
With unemployment still near 10% and consumers still retrenching, it's hard to see why inflation is an imminent threat or why interest rates need to rise.
The U.S. government is still able to borrow at near historically-low rates and if anything, foreign investors seem to have reacted to the Greek debt crisis by embracing U.S. debt.
Also on Wednesday, bidders at the Treasury's auction of 10-year notes /quotes/comstock/31*!ust10y (UST10Y 3.85, -0.10, -2.46%) offered to buy 3.72 times the amount of debt sold, the highest ever, according to RBS Securities.
But with gold at a high for the year and investors on high alert over Greek debt, some of the theories long-held by gold bugs are also re-gaining prominence.
General Motors was back at the track Wednesday, taking a couple of show laps to convince investors it's the leaner, meaner, and thoroughly rehabilitated competitor it said it would be.
4:22 p.m. April 7, 2010 | Comments: 32
- watchdog2010 | 11:54 p.m. April 7, 2010
"Peter Brimelow: Veteran letter says A/D line signals bull market http://on.mktw.net/bUqCJn" 2:28 a.m. EDT, April 8, 2010 from MKTWBrimelow
"Until jobs return, families crowd together: The economic effects of the recession pushed the total number of ... http://on.mktw.net/d32VC0" 6:08 p.m. EDT, April 7, 2010 from MKTWCoombes
"AARP launches online resource for health-reform questions http://on.mktw.net/bFGvSb" 5:30 p.m. EDT, April 7, 2010 from MktwGerencher
"Pelosi: Health-reform debate turned on insurance regulation http://on.mktw.net/9B4xdc" 1:18 p.m. EDT, April 7, 2010 from MktwGerencher
"Mark Hulbert: Some worth more than in October 2007 http://on.mktw.net/98lTXT" 12:02 a.m. EDT, April 7, 2010 from MktwHulbert
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