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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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    Oct 24, 2013 2:47 PM

    By Carlos Guillen

    After a modestly down trading session yesterday, today is turning out to be a fairly encouraging day for equity markets as reflected by the Dow Jones Industrial Average, which is currently up over 85 points. Despite rather disappointing initial claims data and lower than expected manufacturing data from here at home, manufacturing data from China is serving to enthuse some investors, but stocks are also moving higher as investors appear to continue banking on the expectation of no tapering this year.

    The day began with a rather negative note after a small snapshot of a labor component continued to worry investors. According to the Department of Labor, initial claims during the week ended October 19 totaled 350,000, decreasing from the 362,000 revised figure reported for the prior week and landing above the Street's estimate of 341,000. For the past three weeks rather inaccurate data from California is still being worked through, and perhaps the numbers will take a bit longer to recover from the impact of the federal shutdown. The initial claims' four-week moving average was 348,250, increasing from the prior week's average of 337,500.

    (click to enlarge)

    Also discouraging today was that the U.S. trade deficit increased more than expected in August, as exports decreased while imports climbed, representing a second consecutive month of deficit increases. According to the U.S. Department of Commerce, the trade deficit during August totaled $38.8 billion, increasing from the $38.6 billion reported for July and landing above the Street's consensus estimate of $38.2 billion. Given that net-exports play a direct effect on gross domestic product (GDP), a wider deficit may give economists more impetus to revise their growth estimates lower for the rest of this year.

    (click to enlarge)

    Yet another bit of negative economic data was that the preliminary results of Markit's US October Purchasing Manager Index survey landed worse than expected. Markit's index fell to 51.1 from September's 52.8 reading, making it the lowest level in a year, and landing lower than Economists forecast of a drop to 52.5. Given that a reading above 50 indicates expansion, at least we are still in positive territory.

    However, things were different in the world's second largest economy as strong new orders drove the fastest expansion in China's manufacturing sector in seven months in October, more evidence that the economy is stabilizing. As it stands, the Markit/HSBC Purchasing Managers Index (PMI) landed at 50.9 in October, above September's final reading of 50.2 and marking a seven-month high, with 10 of 11 sub-indices rising.

    In all, it is quite encouraging seeing today's trading session continuing to ramp higher despite rather tepid economic data from here at home. But as we all know by now, markets continue to be fueled by the strong belief of no tapering this year, and who knows when into 2014.


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