Daily Insight: Spend It Like You Got It and Factories Humming

U.S. stocks were able to shake off some market weakness overseas and China’s continued pull-back of stimulus measures, as they tighten lending standards, to end two-sessions of decline on Monday. The three major indices gained back most of Friday’s losses.

Certainly a bang-up manufacturing report helped to ease some concerns but the Commerce Department showed the income/spending ratio deteriorated again, which means spending is being stolen from the future. These reports pretty much offset each other, if one is thinking beyond the here and now. More on this data below the jump.

A reader expressed surprise that I didn’t touch on the attempted car bombing in Times Square in Monday’s letter, particularly since I’ve spent several years talking about the importance of geopolitical risks/domestic security with regard to economic growth. The markets found it unnecessary to put in any additional terrorist premium as futures trading was not affected in the least, so I decided not to use space on the topic. However, while we’re on it now, even though it didn’t seem like a serious explosive device, one would think it to be a large enough act to raise concern of the larger issue of terrorism, but no worries for this market…yet. When risks lurk around many corners, it’s only a matter of time before some form jumps out and scares the complacency out of everyone.

Industrials, consumer discretionary (spend it like you got it), and financials led the market higher. The S&P 500 index that tracks basic material shares was the only group down for the session.
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Brent Vondera, Senior Analyst
www.acrinv.com