Higher Rates Not a Bad Thing

Large cap indices closed at new highs.

While there has been some hand-wringing over the runup in Treasury yields today (the 10-year yield is up to 3.46 percent), it should surprise no one: every economic report this week has been above consensus. The ISM Index, Factory Orders, Construction Spending, ISM Services, the ADP Employment Change.

What would you rather have: more jobs and a stronger economy with higher rates, or lower rates with no job growth and an economy growing at 2 percent? I'll take the former.

Note housing stocks are among the biggest gainers today — most up 3 to 4 percent. This makes perfect sense: a better ADP report — more jobs — implies an improvement in housing.

Other sectors also improving. Auto sales, on aggregate, were better than expected. And US Air , the first airline to release December figures, noted that load factor (a measure of capacity utilization) hit a new peak.

Tomorrow we will get December retail sales. RetailMetrics is estimating comparable store sales were up 3.5 percent in December — that would be the best since December 2006.

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