Monday, August 17, 2009

Good News Is Bad News (Bad News Remains Bad News)

Clearly the stock market expectations are much higher than what the Main Street can deliver. The markets go down on good news, because the news was less good than expected.

It started off in Japan last night: "Japan Economy Grows 3.7%, Emerges From Worst Postwar Recession" (8/17/09 Bloomberg)

Japanese economy grew at an annualized rate of 3.7% in the second quarter, the first growth quarter in the last 5 quarters. Following France and Germany, Japan emerged from the recession, technically. The problem here was that the economists were expecting 3.9% (Bloomberg survey) to 4.0% (Nikkei survey). With that kind of disappointment, the Nikkei 225 Stock Average fell 328.72, or 3.1 percent, to 10,268.61 at the close in Tokyo, the steepest retreat since March 30.

Then, this morning at 8:00 am EST, "Empire Manufacturing Index Turns Positive" (8/17/2009 Econompic Data)

The New York Empire State Manufacturing Index for August came in at 12.08; it was expected to come in at 3.00. The latest figure marked the first positive reading since April 2008 and the strongest reading since November 2007. With this outstanding number, did the futures improve? Not a chance.

Then again, at 10:00 am EST, "Homebuilder sentiment index rises in August" (8/17/2009 AP).

The index rose from 17 to 18, highest since June 2008. The stock market turned further south on the news (though it is now back to pre-announcement level), because they were expecting 19.

Also at 10:00 am EST, the Treasury Department announced today's auction result. Overall, good numbers, but no movement whatsoever in the stock market, probably because today's auction was short-term bills only.

The major indices are off the day's lows, but still sport sizeable losses. At 2:14 pm EST, Dow Jones Industrial Average is down 161 points (1.73%) to 9159, S&P 500 down 21 points (2.12%) to 982, Nasdaq is down 48 points (2.45%) to 1936.


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