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Debt Talks and Volatility

July 27, 2011 – 4:06 pm

Most of last week’s rise in the market of about 2% has already been given back this week as of early this morning. This certainly reflects the volatility to be expected with the haggling going on in Washington over the debt ceiling as we approach the supposed deadline of August 2nd.

On the other hand, earnings for Corporate America keep piling in showing better than expected performance though there are those companies that have missed their numbers. Any miss has been severely punished. The current situation will not tolerate any earnings shortfall even if the numbers are very good, but just not good enough.

For this morning June Durable Goods Report was disappointing being down 2.1%. All of it was due to transportation, mostly airplanes. Core durable goods rose .4%. The expectation was for the overall number to be up .3%. However, every sector outside of transportation was up and inventory rose again as well. However the market is not tolerating any miss of the expected numbers not just for earnings but for every aspect of the economy.

These facts mean that the reaction by the market is more due to the debt issue than anything else. Great earnings and better economic numbers have been the story over the last two weeks, and even the Durable Goods Report this morning was not all bad, but the market does not care at this point. This is going to continue. Volatility is going to stay with us for a while even after a deal is struck in Washington, whenever that may happen. Hopefully it will be up volatility.

Good Trading
Steve Peasley

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