By Carlos Guillen
Equity markets are struggling to continue making gains, and at the moment it is not looking as if there will be another session of gains. The Dow Jones Industrial Average started today's trading session encouragingly for the first hour after the opening bell but then proceeded to pull back and has been ringing since.
As it was reported yesterday, China's industrial output had the weakest start to the year since 2009, as production increased 9.9 percent in the first two months, below economists forecast calling for an expansion of 10.5 percent. And retail sales were also disappointing, as they rose 12.3 percent, well below economists' estimate of 15.0 percent. While this data appeared to have been ignored by investors yesterday, it was not. It simply served as an opposing force not large enough to counter the momentum stocks had taken. Today this force is still there, as reflected by retreating Asian markets, and is serving to compel many investors to book some recent gains and take to the sidelines after a rally that has lifted many stock indexes around the world to multi-year highs.
In the euro-zone, a German leading indicator coupled with strong trade data, which showed German exports rising at their quickest pace in five months, have raised hopes that the group of 17 may begin to pull out of its crisis at the end of this year. However, the data still remains mixed as other members of the group are still struggling. What this may be implying is that Germany may be the only savior of the euro-zone.
Here at home, House Republicans have introduced a plan to cut the deficit to $528 billion in fiscal 2014 and then to $69 billion by 2016. This will begin a debate that is expected to bring a 10-year budget proposal from Senate Democrats tomorrow. As we are now well aware, automatic spending cuts began to take effect at the start of this month after politicians failed to come to an agreement to avoid the so called "sequester." While economists expect the cuts to slow the recovery, most do not expect this alone to derail the economy.
In all, today is an overall light day in terms of economic indicators, and investors appear to be taking some profits off the table and taking a break, as reflected by the Dow declining less than ten points at the moment.
Small Business Optimism
By David Urani
The NFIB Small Business Optimism index increased to a reading of 90.8 in February from 88.9 in January, which is obviously an improvement, but it is still recovering from a big drop late last year that took it from 93.1 in October to 87.5 in November. Much of the loss of confidence by small businesses was brought on by pending, and eventually implementation, of the new tax code which targets rich folks and causes collateral damage to many small businesses that operate in that same tax bracket.
Inventory and capital spending were two of the biggest gainers in the month which is a good sign that businesses are feeling the need to invest in future sales again. In a way it made sense to hold back spending given uncertainties around taxes and the sequestration and now it's likely business owners have a little more visibility. Nevertheless, at a reading of -28, outlooks are still recovering from historically low levels hit late last year.
Small businesses' "single most important problem" remains a tie between taxes and regulations/red tape at 21% each.