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Investing Specialists

Market Making You Seasick?

With each piece of data, market sentiment is shifting from one side of the boat to the other, but stay focused on the consumer.

Mentioned:

This week the market was totally infatuated with 1) economic indicators and 2) Greek debt. When an indicator came in above expectations, markets soared. When one missed, markets collapsed. The soaring and collapsing could happen on the same day of the week!

I found it disconcerting that a "poor" economic indicator that nevertheless beat expectations was major cause for celebration. For example, the official government retail sales report showed May sales fell 0.2% versus the Wall Street Journal's consensus estimate of a 0.7% decline, so markets staged a huge rally Tuesday. Never mind that the previous month was revised downward or that sister publication MarketWatch showed the consensus of a 0.3% decline. (There were some things to like in the retail sales report, but more on that later.)

Markets reacted almost instantaneously to poor manufacturing data (industrial production and two regional purchasing managers' reports). But being a go-with-the-flow type of market, stocks soared on improved jobless claims and better housing starts on Thursday (with a sharp but temporary decline due to the Philly Fed Purchasing Managers' Report).

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.