After 8 days of a declining market, stocks bounced higher in Europe and the US. In Europe, there is little reason to bounce other than simply technical trading reasons. Italian bond yields have spiked higher again after a very brief respite below 6%. The more people look at the European agreement from last week’s summit the less impressive it seems.
The US, on the other hand has reason to trade higher. Today’s reports were welcome.
New claims for unemployment dropped significantly again. Temper that with the report that the average number of hours worked declined.
The NY Empire State manufacturing report which is just one state but an important one and usually a leading indicator was surprisingly strong. Temper that with the reminder that last month’s report was downright awful so it moved up from a really low level, though that level is the highest since May.
On inflation, wholesale prices are up 5.7% over November 2010. Temper that with a big drop in oil prices recently.
Technically, the stock market does not look good. It really needs to go higher from here in more than a just a one to three day bounce. Europe’s woes have been dragging our market down and people are worrying about China slowing down too much. Since seasonal factors are strongly in favor of higher US stock prices through January the US market needs to get moving or it may see much lower prices. Today’s economic data supports a higher move for now but the short term trend is lower for now.