"The 0.3 percent decrease came after a 1.8 percent jump the prior month, Commerce Department figures showed today in Washington. Other reports showed inventories rose more than forecast in November and jobless claims climbed last week."U.S. major stock indexes were up measurably today despite a rally in the bond markets. 2 year treasury yields lost 4 basis points to .92 and the 10 year was down 5 basis points to 3.74. The larger macroeconomic data continues to suggest some uneasiness in markets going forward. In the last 2 weeks we've had worse than expected retail numbers, worse than expected pending home sales numbers, worse than expected ISM exports, worse than expected jobs numbers, and 2-year treasury yields dropping 15 basis points in the last 10 days. It's interesting to see bond yields fall sharply as stocks rally.
I'm not entirely sure what's going on here but so far the story looks something like this. Bad news hits, bond investors rush to purchase treasuries, driving prices up, and yields down. Equity investors stare blankly at the macroeconomic data and bond markets, and marvel at the ability of S&P 100 companies to cut costs and maintain profits. In my opinion, larger institutions have been able to maintain profits through cutting inventory, cutting labor costs, and increasing labor productivity, the combination of which will not benefit long term economic growth. I don't think that's a big stretch. In the last month or so it looks as though business sales and inventories are increasing marginally. The only piece of good news I see here is the increase in business sales, that means somewhere out there the largely forgotten consumer is peaking his head out and driving revenue growth. I guess we'll keep taking what we can get at this point. Small victories are better than nothing.
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