Sounds like a Bull Market to me!!
This from Briefing.com:
CPI and Greenspan came and went, and the market not only survived, it prospered. Even though Greenspan indicated that the Fed will tighten on June 30, the market fared well because the CPI report indicated that the Fed's move is indeed preemptive. That's good news for two reasons. First, it indicates that inflation -- the primary threat to end the economy's long expansion -- remains dormant. Second, because inflation is dormant, the Fed is unlikely to move aggressively to slow the economy.
The June 30 rate hike is now of little concern to the market as it is already a known quantity. Into this vacuum has moved Q2 earnings, which are now just a few short weeks away. This is good news for the market, as the outlook for earnings is relatively bright. Even after the high profile warnings from Gillette (G) and Compaq (CPQ) late last week, there have been far fewer warnings this quarter than in any recent quarter. Through the comparable week in Q2 1998, we had seen a staggering 140 warnings according to the Briefing.com archives. This year, the warning total has been a relatively light 88. Earnings growth in Q2 is expected to be a solid 10-12%.
This shifting focus will help the market, but you would be unwise to ignore what has been the driving force behind stocks in recent weeks: interest rates. With the friendly CPI report, we have won a reprieve, but the threat of further Fed rate hikes could emerge as a factor if incoming economic reports point to a growing inflation threat. The good news is that there are no key reports this week, thus allowing for further stock market gains. But watch out for the NAPM index and the Employment report on July 1 and 2, respectively. Though we expect more friendly inflation numbers, these reports present the greatest risk of a reawakening of interest rate fears.
BTY!
D.
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