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It’s the Economy

October 28, 2009 – 9:11 am

We have had some economic statistics this week that did not meet expectations while corporate earnings so far have been beating their numbers. The market however has decided to pay closer attention to economic numbers and is not very happy.

Durable goods came in at a 1% increase from last month but that was expected. New home sales fell 3.6% when it was expected to rise 2%. Inventory rose slightly but the sales number was uncomfortable. You can blame the $8,000 first time buyer tax credit because it is expiring and it takes time to close on the purchase of a new home. The expiring credit is affecting mortgage applications which are sharply down.

We have had very good earnings at the corporate level and mostly the future guidance by these companies is strong but at the same time we see a continuing mixed picture for the future of the economy. We have a couple more days left in the week and we will have the third quarter GDP number tomorrow. Experts are looking for a better than 3.0% increase.

It appears this is the long awaited correction and so far it has not been that deep. In the DOW it’s a few percentage points but it is more pronounced in the NASDAQ at close to 5%. A normal pullback is 10%. We may just get it this time and it would be the first since the market started to rally starting on March 9th. It also will be good for the stock market in the long run.

Good Trading
Steve Peasley

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