The Yanks learnt that their economy contracted at an annualised rate of 6.1% and Wall Street still stuck to the positive. Buried in the figures was a massive drop in exports, but a 2.2% increase in consumer spending. This follows the near-10-point rise in Consumer Confidence in April. The bears and the short-sellers must be getting nervous. In fact, some of today’s rally was driven by those who have been shorting the market now taking a bit of protective cover. That’s called short covering.
The Dow went up 168 points or 2.1% to 8,185.
The S&P 500 finish is pretty important. If it had beaten 875, short-sellers might have got really nervous, though 873 is the closing high for the month. If more good news takes the index way over 875, then this rally can keep on going for some time.
Regular readers know I have always referred to the history of the US stock market rising on average 26% after the economy reached the low point on consumer confidence. Unless something untoward happens, the low was February and that brought the March 9 lows on the markets and we’ve climbed since then.
Other interesting points today were made by heavyweights at Caterpillar and Goodyear who said that the China recovery is going strongly. There were actually record car sales in China in March.
The positives are building and catching up on negatives and what this means is that if bad news comes, it will create a sell off but it won’t go as low as it would have two months ago. Only another Lehman Brothers or Bear Stearns could do that. The full details of the stress tests next week are the next hurdle for the bulls to beat as well as end of month profit-taking.
The Oz dollar again has run with Wall Street, up to 72.64 US cents.
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