Exhausted Sellers, and Calm
Tuesday's rally was something I've been writing about for a couple of weeks now. The "probable recession" priced in, and fear abating, stocks are finding support below S&P 1,150. And stocks can continue to drift higher as we wait for more evidence, or for Europe's banking system to unravel.
Modestly good news from China's manufacturing sector helped industrial, energy, and materials stocks especially. And the Good Dr. Copper lifted its head above $4 a pound. As you know, this is a key commodity whose demand and price trends can signal expansion or contraction.
Speaking of recession, you've probably heard Steve say here more than once that stocks are the best forecaster of an economic decline. How does it go? Oh yeah... the stock market has accurately predicted 14 of the last 9 recessions.
Why might the relief rally continue until we know how bad the recession could get? Corporate cash and stock buy backs. Academic studies prove a strong positive correlation between rising equity markets and buy back levels. See my piece below about an economist named Smithers for more insight.
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Senior Stock Strategist, Zacks Investment Research
Today's Top Stories: Wednesday- August 24, 2011
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