The stock market continues to grow, despite the bad news.
However, market analysts predict continued growth, not depending on the outcome of the employment report on Friday.
The leading stock indices of the United States very quickly recovered after a slight decline on Tuesday, despite several poor news about the state of the US economy.
At the time of the closure of trading on Tuesday, Dow Jones, S & P 500, and NASDAQ composite decreased by 0.11%, 0.13%, and 0.04%, respectively. However, on a premium on Wednesday, their indicators amounted to + 0.19, + 0.26%, and +0.2 for Dow Jones, S & P 500, and NASDAQ Composite, respectively, which confirms the preservation of strong “bullish” moods in the stock market.
On Tuesday, Wall Street got three bad news on government economic reports.
- The fall of the PMI of the Chicago business activity index is one of the leading indicators of the US economy.
The Chicago Business BarometerTM index fell in August to the lowest indicator since June, reaching a two-month maximum in July. The hand was worse than the forecasts of economists and showed problems in the chains of supplies of manufacturers.
The shortage of raw materials, materials, and recruitment problems in different industries does not allow to satisfy demand promptly, because of which the production and prices are growing.
- The consumer confidence index in August fell to the lowest level from February 2021.
The Conference Board consumer confidence index, based on the assessment of consumers of the current state of business and the labor market, fell in August to 147.3 from 157.2 last month.
The expense index based on consumer’s short-term forecasts regarding income, business, and conditions in the labor market fell to 91.4 from 103.8.
- Housing prices in the United States reached the next record level.
Case-Shiller, the housing price index has grown by 1.8% compared with a month earlier, resulting in an annual increase of 19%. Nevertheless, economists say that the current rise in housing prices indicates that inflation growth is unstable.
What do investors say?
It is rather unusual that these government reports did not cause a more substantial reduction in the stock market – stocks resumed growth on the next day.
This does not mean that investors should ignore such reports, but it confirms Wall Street’s strong “bullish” moods.
At the same time, Jan Shepedson, Chief Economist Pantheon Macroeconomics, calls on investors to prepare to reduce consumer sentiment further.
According to consumer expectations, next year, prices will increase by 6.8%, which is significantly higher than the 2% rate, which politicians consider stable.
According to the ISM-Chicago report, the manufacturer’s survey showed that most do not expect personnel in September. At the same time, many economists and managers of central banks, on the contrary, hope that this month will show significant improvements in employment since unemployment benefits become less generous, and children will return to school.
The critical event of this week should be an employment report in the non-agricultural sector of the United States, which will be on Friday.
Although he confirmed that the reduction in the purchase rate of assets would begin this year, it will not lead to the beginning of the reference of a possible increase in rates.
For investors, this means that bad news will not have negative factors for markets – growth promotions that are sensitive to interest rates will continue to grow.
Against the background of these statements, the Fed will be entire if the market does not significantly respond to any outcome of the employment report on Friday. On the other hand, if the amount of hiring exceeds expectations – the needs are probably not falling since the officials of the Fed made it clear that the information for September would be more priority for their decisions, which will in October. Meanwhile, the lack of jobs can mean only the further growth of the stock market.
