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Does the Market Fear a Trump Rally Hangover?

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Thursday, January 19, 2017

Lots of econ data has been reported ahead of the bell this morning, offering a balanced diet from a steady stream of (mostly good) Q4 earnings results. Initial Jobless Claims have stayed remarkably low, Housing Starts provide some pop and the Philly Fed keeps its robust production numbers in high gear.

At 234K jobless claims in the last week — down 15K from the previous week’s revised 249K — is extremely low, demonstrating a very healthy U.S. labor market. We have not seen sustained levels this far under 250K since the 1970s, when the workforce population was significantly smaller than it is today. Continuing claims also stayed low at 2.046 million.

Housing Starts rose 11.3% to 1.226 million on a seasonally adjusted, annualized basis. Permits stayed level from the previous read of .21 million. We are still seeing a lag in housing performance relative to overall GDP; millennials simply aren’t buying houses (yet). Until this happens, we expect housing to underperform other sectors of the domestic economy. That said, a pop of 11.3% is nothing to sneeze at.

The Philly Fed survey was also released prior to the market open, which provided some oomph of its own: +23.6 in January even topped the strong December number of +19.7. True, it’s regional strength and not necessarily representative of the economy as a whole, but with this read as high as it is, it’s worth taking note of yet another aspect of strengthening domestic productivity.

ECB President Mario Draghi is speaking at this hour, crediting positive developments he sees within the Eurozone’s economy with actions toward lowering interest rates in the ECB in the recent past. Draghi said he sees no sign of a convincing upward trend in inflation, and continues to state he and the ECB will use all instruments at their disposal to enhance economic conditions in the region.

All of this follows Netflix’s (NFLX - Free Report) outstanding Q4 earnings report after the bell yesterday. We look forward to IBM (IBM - Free Report) reporting after the bell today. Will we see this uncommonly robust narrative continue as the first of the Big Tech firms bring in their earnings?

And if so, why are we seeing markets down again this morning? Even with all the good news surrounding the market, futures are in the red (slightly) again. Is it possible the spectre of the incoming Trump presidency is making some market participants fear a rally hangover?

Mark Vickery
Senior Editor

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