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More Than The Fed - By Charles Payne

Dec. 22, 2014 10:15 AM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Question of the Week

The Dow Jones Industrial Average was nearly 20 points away from breaching the 18,000-level earlier this month. However, GDP concerns, the Russian Ruble Crisis, and the oil bubble deterred that rally. What events do you believe need to take place in order for the American Rally to continue rising higher and break the 18,000-level before the end of 2014?

Post your answer below.

I know Fed policy is designed to help stocks, but the textbook narrative has yet to play out… money hasn't come pouring out of stocks and Main Street isn't jumping in the market at breakneck speed- even the smart money has missed a lot of this rally. Still, bears, shorts and booksellers will whine into the New Year about this being the Fed-induced rally, hinting that investors should stay away. They've missed 13,000 points and are the greatest example of pride and ego.

The sad part is they've costs millions of would-be investors to miss 13,000 points, too.

If you want to assign reasoning for the rally, begin with the fact our foundation didn't break even though it was under economic and political assault. Yes, we are far from where we could and should be, but this rally, which began with stocks at absurd lows, is now the American Rally.

See this morning's report on initial jobless claims at the lowest for current week of the year since 2000.

Last Thursday 's manufacturing report for the Philadelphia region underscores the amazing good fortune for the nation at the moment. The headline number was a little below consensus, but last months record was unrevised. Moreover, prices paid declined while prices recived increased, hinting at bigger profits margins.

December Philly Fed Report

Nov

Dec

Prices Paid

17.3

14.0

Prices Received

11.5

12.5

And a special question on December cost versus 2014 found (mostly) encouraging trends. More than half manufacturers say they increased wages and almost as many said energy prices are lower. The lone negative response going into 2015 is 67% of manufacturers saying healthcare cost is higher.

December v 2014

Costs

Wages

Energy

Healthcare

Higher

50.8%

19.4%

66.7%

Same

42.9%

32.3%

27.0%

Lower

6.3%

48.4%

6.3%

At some point, if history is a guide, all that textbook Fed-induced action will happen. We're talking rotation out of bonds into stocks, Main Street pouring in piles of cash including the milk money and book sellers throwing in the towel with new titles like Dow 40,000 instead of (my last book) Dow 5,000.

Today's Session

In the absence of heavy economic data this morning, the major equity indices were poised to open the session well about their previous close, however, the NASDAQ gave up at the open and began trading in the red. Investors can begin the chatter of the Dow Jones Industrial Average reaching 18,000 again as the index is back to being on 200 points away. The price of oil is sliding once again, which may not help a rally today, but we shall see how the session plays out.

This morning, the Chicago Fed National Activity Index (CFNAI) released its monthly index reading, which is designed to better gauge overall economic activity and inflationary pressure across the US. The big 1.1% jump in the manufacturing component of the industrial production fed a very strong plus +0.73% reading for November's versus a revised +0.31% in October (up from +0.14%). However, other index components were flat with the positive contribution from employment edging slightly lower while the positive contribution from sales, orders, and inventories seemed to disappear. Also, the drag from consumption and housing remained moderate. Most importantly however, were the outsized gains in manufacturing, which boosted the 3-month average to +0.48% in November from October's revised +0.09% which was the component's strongest reading since May 2010.

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