There are a couple of things moving the market higher today.
There was some notable positive news today and that was a better than expected case-schiller housing index for April. It was the first month over month increase in prices over the last 8 months. One of the big fears right now is if we get a strong double dip in housing. This is not the all clear signal for housing but expectations were getting pretty negative. The index came in at 0.8% increase vs expectations of -0.6%. This is the non-seasonally adjusted index. When you adjust for seasonality the rise was only 0.1%, that is still pretty positive as I think the market was braced for a negative number. My expectations are that housing is going to stabilize and the housing prices will start a very slow uptrend within the next year. This is based on my expectations that we will not go into a recession.
On the Greek front – the Greek parliament is going to vote on an austerity package tomorrow to get eligible for bailout money from the Euro zone. Expectations are very high that it will go through. So Greece will end up buying some more time. But frankly the Greece situation is a big mess and it is hard to see how they will get out of this situation without an eventual default. The European sovereign debt issue will be the biggest macro risk facing the global economy over the next few years. This is an issue which will probably keep popping up every few months as the EU is trying to attack this issue with a band-aid approach.
The other positive is that so far we haven’t heard many earnings warnings even though we are at a point where a lot of companies probably know whether they will miss earnings or not for the 2nd quarter. So that is another positive sign and indicates most likely companies will again meet or beat expectations.
I need to some more positive data before I conclude that the market may have already hit the summer low. We still have some negatives like unemployment claims remaining stubbornly high, uncertainty surrounding end of QE2 and financial stocks acting very poorly.