Over the last six sessions the Dow traded in a narrow 200 point range and the S&P followed suit, trading within a 25 point spread; not surprising due to the number of people on vacation this time of year resulting in low daily volume and a lack of direction.
The economic news did not help this week, which was mixed and lackluster. On Monday there was a bright spot as consumer personal income in July posted a 0.2 percent gain, following no change at all in June. More importantly, the wages and salaries component rebounded 0.3 percent after slipping 0.1 percent in June. The Fed is depending on the consumer to counter a faltering housing sector - Bernanke and Company got its wish at least for July. Overall personal consumption increased 0.4 percent, following a flat number in June. How did the market react? The Dow sold off by over 140 points anyway; obviously traders didn’t think the numbers were good enough. Since the PCE (Personal Consumption Price Index) rose by .02, which is slightly inflationary, that should have been looked at as a good thing, since there has been so much worry about deflation. But no – it had no affect.
Today was a roller coaster, affected by reports showing an increase in home prices for June, a weak consumer confidence index and a mixed picture from the Fed minutes released at 2:00 PM. The result was a close with little change in the markets.
Interestingly, the Fed minutes pointed to the widespread differences between the Fed governors on what should be done to affect the state of the economy. Some feel we are doing just fine, while others are ready to take more stimulus action and still others are sounding the alarm for disinflation – a slow deflationary decline in prices. No wonder the public is confused. They can’t decide amongst themselves what the next course of action should be.
Anyway, let’s see if the ADP employment report, jobless claims and the national unemployment report on Friday will have better luck in moving the markets.
C. Cohn
Cohn-Reilly Report
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