Global Markets Driving the Dow

Saturday, April 21, 2007 | 08:17 AM

This is the most cogent argument for what has been a key supporting element to the US markets: Overseas economic strength. Even as the US decelerates, the overseas strength, driven primarily by China, but with growth in Japan and the rest of the Pacific Rim, as well as Europe, is maintaining the global boom.

We have discussed over the past few Qs exporters, who can sell into those markets, and take advantage of the weak US currency. That continues to be the greatest market strength out there -- not so much their consumers, but their massive infrastructure development. And, as strong as the US markets appear, they continue to lag most world markets.

Barron's Mike Santoli sums it up nicely:

"THE REST OF THE WORLD IS CARRYING THE U.S. STOCK MARKET. Fast-galloping overseas economies, flush world capital markets and a sagging dollar fatten multinationals' earnings and furnish the fuel for commodity-related stocks to surge.

That's the takeaway from the earnings beats by Caterpillar (CAT) and Honeywell (HON) last week, the 22% jump in the Philadelphia Steel Producers index since March 5, the continued outperformance of foreign stock indexes, the seven-month high in copper and the run toward $700 an ounce in gold.

As a result, materials stocks are the new momentum favorites, and more broadly, traditionally cyclical sectors are being treated and valued as perpetual-growth vehicles -- a process even extending to sectors like railroads and utilities, now considered implicit plays on the commodity-demand boom."

That makes a ton of sense to me . . .


The Fido Shuffle   
Michael Santoli
Barron's April 23, 2007

Saturday, April 21, 2007 | 08:17 AM | Permalink | Comments (22) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» Behind the Stock Market from Businomics Blog
I've been ho-humming while everyone else is swooning. Yes, the market is up. Gee, though, this doesn't feel like a boom to me. The market is up 15 percent from a year ago, which is very nice, and above average. [Read More]

Tracked on Apr 21, 2007 3:13:16 PM


It would make sense to me also if I saw capacity utilization and backlogs growing in these industries. But both remain weak in basic metals and steel although they are strong for aluminum. Moreover, the I/S ratio for primary metals is also rising. Finally, metals stocks at the London Metals Exchange are rising. All these variables typically lead spot market prices. But now we are seeing prices rise while these traditional leading-concurrent indicators are weakening.

Something does not add up.

I suspect it is hot money driving up spot prices in a final speculative binge.

Posted by: spencer | Apr 21, 2007 9:09:10 AM

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