Stock index futures were rocketing higher this morning off of Well Fargo's (WFC) "earnings beat." The significance of this is open to debate, but the shorts are scrambling for cover, no doubt.
I found several other pieces of data released this morning far more telling of the current economic, and hence corporate, conditions.
1) Intitial claims for unemployment still extraordinarily high at 654,000.
2) A drop of 5.1% in imports, resulting in a large drop in the US trade deficit. Multi-year lows in imports from Japan and China.
3) Same stores sales at Wal-Mart (WMT) up an anemic 1.4% and below consensus.
These three pieces of data point to increasing unemployment and hence decreased purchasing power by US consumers. Unemployment continues to rise rapidly, and consumer demand continues to decline. These data are not supportive of higher stock prices either in the US or in countries that depend on US demand such as China, Japan, and the emerging markets.
I believe that at this point stock and commodity prices are rising due to increased investor demand as money moves from cash and bonds into stocks and commodities. Also, there is a "hope" that a few months from now the economic picture will be better than it is now, and stocks "anticipate" this. I personally don't see any signs of this. The only reason I would be long stocks or commodities now would be as a trend follower or trader front-running some major asset allocation shifts.
