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Softness Attained

August 2, 2010 – 5:24 pm

With great earnings out of European banks over the weekend and continued strong numbers out of U.S. companies the stock market jumped in early trading on Monday. The dollar continued to fall which should help our exports in coming months and of course it causes imports costs to rise. It is always difficult to gauge what is better but most economists believe it is best to have a stable dollar as that gives manufacturers of imports and exports a chance to plan for consumer’s needs further out and provides consistency in profit projections. Of course that is all in a perfect world and we certainly know we don’t live in one of those.

After a half hour into Monday’s market day two reports were released: June’s construction spending and July’s ISM Index. Both numbers were better than expected. ISM came in at 55.5 when it was expected to be 54. However, last month it was 57; that’s not good news. New construction spending was a big surprise. It was expected to fall .5% and it went up by .1%. That rise was due to government projects.

There is no doubt that we are in the soft patch in this economic recovery but we might be seeing the first hints of a new low in the numbers. In other words maybe the softness is done softening. We won’t now that for a couple months but the market is reacting already. I think, at least for the month of July and the first trading day in August, it’s time to push stock prices up.

June’s job report will be out on Friday. The expectation is to lose another 60,000 jobs. That certainly is not recovery.

Good Trading
Steve Peasley

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