Rally ballyhoo

So I am guessing that most of you saw that the Dow Jones, and other stock markets, were up big time on Monday, yes? It was certainly a welcome reprieve, especially since the news that had driven the stock markets down so much over the previous many trading sessions was a little thin. In other words, the sell off had more to do with people locking in their gains than any really substantive, unexpected news. The problem of course is that the stock market, for worse, is perceived as a gauge of the health of the economy. If the stock market is rising then your average citizen feels that the economy is doing well. So a big sell off can make people feel queasy and as if a depression is around the corner. In fact, it’s my opinion that the fear of a depression has become a part of the collective unconscious of our culture. Unfortunately, fear of a depression exacerbates recessions and turns them into potential depressions. Thus, I am glad that the markets rallied today and for a pretty good reason.

Lowe’s (ticker: LOW), the home-improvement retailers, beat its first quarter earnings estimate by a handy margin, and it boosted its full year outlook. Why is that important news? Investors have been looking for signs of health in the housing market. For Lowe’s to do well means that consumers are opening up their wallets and spending on their homes again. Yes, these are existing homes, and not new home sales predominately. However, movement at all at Lowe’s means that things are improving in the consumer mindset. Previously folks were in lockdown, and now they are thinking about spending on their homes again. Good news. Also, some Wall Street Investment Banks’ analysts became bullish on bank stocks – most notably Goldman Sachs. Day late, many dollars short.

It will be especially telling to see how the stock markets digest the next piece of bad news. That bad news could be disappointing earnings, it could be unexpectedly high unemployment, it could be disclosure of a scandal, etc. It will be important to pay attention to see how that next piece of bad news is processed: buy or sell or indifferent. I would prefer indifferent.

Peace out!

Jason