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More Evidence

November 16, 2009 – 10:57 am

Stocks pushed higher Monday mostly on the back of a better than expected October retail sales report. The projections was for a 1% increase and it came in at 1.4%. Stronger auto sales surprised everyone. The cash for clunkers program caused sales to be strong in September  but everyone expected a fall off in October when in fact sales held up very well. Even excluding autos retail sales increased.

Later in the morning September inventory numbers were reported and they fell .4%. That was less than expected as the experts were calling for a .7% fall. Inventory has been falling for months and at some point it will need to be rebuilt. There is some evidence to support the start of that rebuilding. Containers and container ships are starting to see increasing demand and most of that demand is coming from Asia.

Not everything is rosy. This morning the Empire State manufacturing index fell for November. That indicates shrinkage in the New York area in manufacturing. That acts as a break on the recovery story of our economy and may hint at a less than robust GDP number in the fourth quarter. Add to that last weeks data showing more imports than exports, which detracts from our GDP, you still have a confusing economic picture. Why are imports exceeding exports even while our dollar is falling? It’s because we import 50% of the oil we use and have done nothing to reduce it. As the dollar falls oil prices go up. We are hurting ourselves.

Everything is looking better but the jury is still out on the verdict of an economy. Yes, we are recovering but to what
extent and for how long? When will jobs stop being lost and start to grow again?

Good Trading
Steve Peasley

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