The days of markets turning bad news into good news could be winding down if pressure continues to grow on the Federal Reserve to begin unwinding its monetary easing policies while the economy weakens.
As long as the Fed has been at the ready with its trillions in liquidity, stock investors have used negative readings on the economy simply to anticipate more central bank assistance.
But the market now finds itself at an interesting cross-current: The bad economic data, such as this week's Institute for Supply Manufacturing negative reading, is coming in conjunction with calls for the Fed to ease its foot off the gas.
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"Having been rather patient in awaiting a turning point for U.S. economic data, we do not view this as a welcome development," Andrew Wilkinson, chief economic strategist at Miller Tabak, said in response to ISM data showing contraction in the manufacturing sector and flattening job growth.
"We would also comment that the accompanying weakness in domestic data will probably prove insufficient in fluffing equity investors' appetite to buy purely and simply because the Fed is more likely to remain at the wheel," he added in comments that, if correct, would mark a sharp divergence in investor behavior.
Since the post-financial crisis bottom in 2009, the Standard & Poor's 500 has soared 145 percent while the Fed's balance sheet has quadrupled to $3.4 trillion.
In the latest version of its quantitative easing program, the Fed is buying $85 billion a month of Treasurys and mortgage-backed securities.