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Where the Worry Lies

September 14, 2011 – 4:50 pm

Three reports on our economy were released this morning. First, July inventory numbers came in near expectations, up .4% rather than the .5% expected. For August retail sales were flat and without autos it was up .1%, not much of a difference. That was less than the expected .3% gain. No matter how you look at it the numbers are weak showing us just how worried the consumer was in August.

The only good news was the PPI showing a flat inflation number and the core rate was up only .1%. No inflation.

The stock market did not react to any of this news. It was up this morning on a hint of a better situation in Europe and then fell on a rumor concerning Austria before trying to recover again. That tells us where the worry is: Europe. The fear is possible contagion to other countries besides Greece. That worry is over blown, but for the time being the focus is there. When bad news in our economy does not affect stock prices that usually means that the news was anticipated and stock prices already reflect that bad news. For the time being it’s all about Europe even though our economy is struggling.

The stock market already knows all of the bad news, pricing in those events, and that bodes well for the future. It is dealing with the volatility that is difficult. Our consumer is key; he/she paused in spending in August so we need to watch what he/she does as Fall approaches.

Good Trading
Steve Peasley

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