Import/Export Prices, Consumer Sentiment, Treasury Budget

The benchmark S&P 500 has gained 52% since early March and investors continue to be optimistic about buying equities. The last five days have seen consecutive gains in the markets, pushing the index up another 1.25%, and futures are looking to extend those gains early this morning.

Pretty soon the climb could match the even more robust 64% gain in China’s Shanghai Index. Its 2.2% rise earlier this morning, set off by better than expected data in industrial production, retail sales and lending, is a major factor in boosting sentiment around the globe today. 

“Valuations have nearly doubled to 19 times earnings since March, so there’s a lot riding on the improved economic picture,” said Sal Guatieri from BMO Capital Markets in a morning note.

Gains in financial markets and improvement in recent economic data allowed Treasury Secretary Timothy Geithner to announce yesterday that policy would shift towards unwinding the government measures introduced to stabilize the economy after the collapse of Lehman Brothers almost one year ago.

A government guarantee on money market mutual funds, implemented last September when one major fund “broke the buck” (fell under par value), will expire on schedule at the end of this month.

“As we enter this new phase we must begin winding down some of the extraordinary support we put in place for the financial system,” Geithner said, adding that the government will reinforce recovery until it is “led by private demand.”

Geithner also told Congress to cancel the option of tapping into an additional $750 billion, a back-up no longer needed now that the economy has “stepped away from the brink” and is now “pointed in the right direction.”

In this morning’s headlines, the Census Bureau reported that inflation-adjusted household incomes fell 3.6% from last year to $50,303. The Wall Street Journal calls that “the steepest year-over-year drop in forty years.”

For the housing market, a Realtytrac survey found that foreclosure filings fell 0.5% to 358,471 in the third quarter. Still, filings are up 18% from last year.

Also, the White House Council of Economic Advisers said the administration’s $787 billion stimulus package added 2.3% to real GDP in Q2, which overall moved down 1.0% in the latest estimates.

Key Releases Today: 

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