Hardly a day goes by without some piece of data being released, which casts doubt on the economic recovery. Yesterday, the culprit turned out to be a large drop in consumer confidence, although better-than-expected earnings from Walgreen offset the bad news helping the market close higher.
The rally gathered some steam in the last hour of trading as the dollar declined against the yen and the euro.
Causing trouble early on was the Consumer Confidence Index, which slipped to a reading of 48.5 in September from a revised 53.2 in August. That turned out to be the lowest level since February.
It’s no surprise that confidence is waning in the face of no improvement in the labor markets and continued uncertainty whether a double-dip recession can be avoided. For that matter, it’s questionable whether the economy can even stand on its own legs and produce growth without being stimulated.
All that uncertainty helped gold break through the $1,300 level with silver reaching its highest price since 1980.
New data will be closely watched as we head into the final quarter of 2010. At the first sign of more economic weakening, the Fed has promised an assist via Quantitative Easing 2.0; an effort which will be closely scrutinized to see if it can produce any meaningful results.
In the absence of any positive effects, traders on Wall Street may very well reevaluate if these lofty market levels are indeed justified.
Chart courtesy of MarketWatch.com