Wednesday, June 16, 2010

PPI, Housing Starts for May: Not really good, but will it affect the market?

Yesterday was an unusual day in the market. The Dow soared up above the R2 (Resistance) level of 10,377, closing above 10,400 and all on bad news during the day. I had said it wouldn't happen. I was wrong. The Futures were pointing down as the PPI data and Housing Starts data was to be released. The PPI (Producer Price Index) came in at -0.3% compared to being down -0.1% in April, while Housing Starts were down -10%. May Building permits were down -5.9% after being up +3.9% in April.

The PPI numbers continue to support the fact we are in a Deflationary period, contrary to many who believe we are in Inflation. Does it really make a difference? It should as it affects Fed policy, but the stock markets seem to be driven by the beat of a different drummer and we aren't sure who's beating that drum, are we. This stock market even has Cramer scratching his head, as he said on his CNBC Mad Money show yesterday. To quote Cramer, "It makes no sense at all!"

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