Sunday, December 04, 2011

Many Corporate And Consumer Positives

I noted in a post a few weeks ago about the positive trend in the JOLTS (Job Openings and Labor Turnover Survey) report which was released by the US Department of Labor and indicated job openings, as of the end of September, were at their highest level since 2008. Additionally, jobless claims, a key leading indicator, have now moved below 400,000 on a four-week moving average basis, which signifies an improving job market. The ADP Private Payroll report showed a 206,000 job gain in November, well above estimates and the best reading since March 2010. The broader November jobs report indicated the US economy added 120,000 jobs and that the unemployment rate declined to 8.6% from 9.0%, the lowest rate since March 2009.

On the corporate side the October Index of Leading Economic Indicators rose 0.9%. This was the sixth monthly increase in a row. Nine of index’s 10 components saw increases for the first time since May of 2003. As noted by the conference board,
“the LEI is pointing to continued growth this winter, possibly even gaining a little momentum by spring. The lack of confidence has been the biggest obstacle in generating forward momentum, domestically or globally. As long as it lasts, there is a glimmer of hope.”
From The Blog of HORAN Capital Advisors

Other positive corporate data points:
  • Industrial production rose 0.7% in October
  • Chicago PMI rose to 62.6 from 58.4, a seven-month high, and the new orders component rose to its highest level since March at 70.2
  • The Institute for Supply Management’s (ISM) Manufacturing Index rose to 52.7, the highest level since June
  • New orders increased to 56.7 from 52.4
Lastly, a number of our articles are republished by SeekingAlpha. Yesterday they republished our post, Market Driven By Emotions Versus Fundamentals. What was interesting is the number of bearish comments (contrarian indicator?) and one comment about the macro environment having a controlling influence on the markets direction.

The biggest potential market negative seems to be the debt crisis in the Eurozone. On the other hand, the economic environment in the U.S. continues to improve in spite of the downward revision to third quarter GDP from 2.5 to 2.0. The revision was largely attributable to a decline in private inventories, which reduced overall GDP by 1.55 percentage points. This type of revision likely means higher growth in Q4 and into early 2012 as businesses have to rebuild inventory levels to keep up with what appears to be improving demand. Our post, Market Driven By Emotions Versus Fundamentals, details some of this demand by touching on the strength in retail sales on Black Friday and Cyber Monday.

From The Blog of HORAN Capital Advisors

From The Blog of HORAN Capital Advisors

There are many positive data points for investors to consider. Certainly the issues in Europe, not to mention in Washington, are not to be made light of. However, the magnitude of the market's advance last week might be some indication of the attractiveness of U.S. equity valuations. Market volatility is high though, so investors should take a disciplined approach if they are building equity positions.


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