Equities Ignoring Negative Data is Cause for Concern

This has been the trend over the last week - bad economic data comes out, yet the market plows on onwards and upwards. Last Friday, Univ. of Michigan Consumer Confidence disappointed by a point and a half (72 vs 73.5 expected). Ignoring that completely, the SPX rallied hard, investors choosing to focus on the positive but heavily engineered JPM earnings instead. It was a similar story when July Retail Sales printed a dismal -0.5% on Monday vs +0.2% expected.

The market tends to ignore bad data points in one of two situations. It does that at the bottom of long bear markets, under heavily oversold conditions,

The Job Numbers Were Bad - But Apparently Not Bad Enough

On Friday Non-Farm Payrolls for June showed an increase of 80k versus a (revised upwards) expectation of 100k. Not surprisingly the stock market sold off on the news, but eventually closed less than 1% down on the day. The US economy is growing very slowly but it is nevertheless growing. Which in some sense is a bad thing, as it means that Big Ben will probably not have an opportunity to come to the rescue with another round of Quantitative Easing.