Two things helping the market today...the economic data and the calendar.
We got better data today on China manufacturing and on the U.S. ISM...that's a big help.
But the other factor is the calendar. Why? It's a New Year! You gotta put the money to work, you can't coast anymore.
Remember November-December? Talk about coasting! A lot of traders got out of the risk trade then, and the dollar rose, but it's time to end that. A new calendar means you've got to put that money to work.
Going back to buying commodities on a global growth story is the easy trade, and that is exactly what is being done today.
What's missing? Volume--it's anemic. But the action is definitely to the buyside...what action there is, is clearing coming from bidders.
The wildcard is the dollar...strong employment data Friday may well bring dollar strength...but a lot of traders are not afraid of that...the market showed in December that it can go up when the dollar goes up.
What stocks can stand when the dollar stabilizes or moves up? A lot, if the U.S. economic picture improves.
We've noted this strange dichotomy earlier: analysts are busy upgrading sectors like chemicals (Goldman Sachs) or refiners (Deutsche Bank) this morning, while economists meeting in Atlanta for the American Economic Association seem to be extremely pessimistic.
Look at Paul Krugman's comments in Atlanta:
1) he sees need for more stimulus because the current stimulus effect will fade at midyear,
2) unemployment likely to increase,
3) housing prices could drop another 5-10%, and
4) he sees a 30-40 percent chance of a double dip recession.
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