Stock Market: Ready For The Comeback?

Last week was very dark. We had to bid farewell to Steve Jobs. Shine on, you iDiamond! But the economic picture is getting brighter, at least in the U.S.

Some data from the economic front was better than expected and signaled a comeback of the U.S. economy. On Friday we were surprised by a decent employment report: In September payrolls rose by 103,000 after a 57,000 gain in August. On Tuesday we got impressive solid retail sales numbers: According to Thomson Reuters, U.S. retailers posted an average gain of 5.1 percent in sales at stores open at least a year, or same-store sales, outpacing the average analyst estimate, which called for same-store sales to rise 4.6 percent. Both data show that consumer expenses, the motor of the economy, are still growing at a solid pace.

Other data also displayed encouraging improvements: Manufacturing unexpectedly accelerated in September, propelled by gains in exports and production, reported Bloomberg. Construction spending expanded in August, and orders for capital equipment increased the most in three months, government data showed.

The economic picture in China, the second engine of the world economy, also got brighter: The indicators for manufacturing and for services both signaled higher growth rates in September.

These news stories confirm that the hard data are much better than the extreme pessimistic sentiment. They demonstrate that the recession fears are way overblown and that the stock market correction went to far. If the hard data flow keeps solid we could expect a strong recovery of the stock market. Last weeks gains, the S&P 500 gained last week around 2%, which could be the start of a significant year end rally!