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Deja vu

June 6, 2012 – 5:00 pm

Just a hint of good news out of Europe spurred the market higher this morning. However maybe much of the increase in stock prices is simply the reaction of being oversold, thus any perceived good news would cause a small rally. To be sustainable the hint of good news would have to turn into a reality of good news. That could take the form of Europe issuing a EURO wide bond, which Germany opposes, but might have to accept. The good news could also be a stimulus program that is enacted instead of just being discussed. Something more concrete from Europe would bring about a sustainable rally. We will have to see.

The few bits of economic news out this week has been in line with expectations. That means it is neither worse nor better than lackluster. The ISM nonmanufacturing report was a fraction better than expected but factory orders were worse than expected. Productivity was down .9% when it was expected to be down .8%. Being down is not a good thing. We need it to be up. Labor costs were up 1.3%, up less than expected, but being up is good for retail sales but a drag on productivity.

These numbers confirm a softness in our economic growth story and investors are trying to determine if it’s just softness or a more serious issue. It appears the numbers are supporting the softness story and not a return to recession. Looking back to last summer it feels very – Deja vu.

Good Trading
Steve Peasley

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