US stocks positive but erratic, as the bulls aren’t anywhere near ready to give in on their new-found prowess. But while the “not-as-bad-as-feared” trade has once again proven its momentary value, it still can’t completely paper over the “it’s-bad” reality.
The final reading on 4Q GDP came in at a 6.3% contraction. Clearly, that is awful. But it “wasn’t as bad” as expectations of a 6.6% contraction. On Wall Street, that math still adds up to a buy.
Consumer discretionary, industrials, tech lead gaining sectors; utilities, telecom lead decliners. Financials essentially flat. DJIA up 65, S&P 500 up 8, Nasdaq Comp up 32 (2%).
The question of whether this rally is of the bear-market variety or something more lasting has quickly been answered, at least to Wall Street’s satisfaction: the bear is dead. Long live the bull. But don’t take our word for it.
Stocks don’t react to news, (Jim) Cramer told viewers on Wednesday, they anticipate it. So the Dow’s seesaw-like action today is a bullish sign of things to come.
See? What’s to worry? The pain is over. Let the bull begin.
Of course, the market wasn’t exactly right in March 2000 or October 2007. So it’s still worth questioning whether the market got it right two weeks ago in signaling that the recession is on its way out.
“Never in the history of the world has a bubble burst halfway,” Minyanville writes. They fall back to where they started or lower. And today there isn’t just one bubble bursting, they say, there are three: housing, consumer spending and US total debt. Home prices would need to fall another 21% to reach pre-bubble levels, site says. “Anyone predicting a recovery by the end of 2009 is delusional.” The consumer spending bubble didn’t peak until 2008. And total US debt? Well, they don’t exactly say it, but let’s be honest: it’s still peaking. “If our government continues to follow the path it’s chosen, our country will be bankrupted.”
Prudent investors would be wise to remain cautious.