Some More On Today's Odd Market Action

Good to know that we are not the only ones scratching our heads over why the market was so much higher today. Goldman Sachs is also confused, but they are better than we are at goalseeking arguments to conclusions, so we present their commentary uninterrupted:

The last dreg of auto news hit the tape before stocks settled up and it was ugly – 55% drop in Chrysler January sales. The drop completes the big three US auto makers pain. The issue, however, is whether the good news of NAR pending home sales truly countered the bad news of auto sales. The answer is neither – as pending home sales was a foreclosure firesale from the West while the car sales were expected to be down 35% and come in a bit worse but clearly not a surprise. The reasons for the equity market being up 1.6% today: 1) Earnings – better than expected earnings from Merck helped set the tone; 2) Higher energy and metal prices – Oil up $0.80 on the day; Copper and other industrial metals up helped support energy and industrials; 3) More hope for stimulus and bad bank plans – The Schumer interview on Bloomberg helped push the idea of a blanket guarantee for toxic assets rather than a outright purchase plan. 4) China/US talks – Geithner confirmed he had a chat with China Vice Premier Wang – and this helps put down fears of a larger US/China trade war. Important as the GM analyst pointed out China auto sales beat US auto sales in January. So we have some logical reasons to take the mixed data report from today and push beyond the present for a recovery story. The biggest story on the day was from the home vacancy rate which climbed to 2.9% - but that headline doesn’t tell you the whole story – there was a drop in home ownership participation back to 67.5% or 2000 level the implication is that there is still a lot of housing supply to worry about. Net – today started sideways and ends in a trend – bonds lower – significantly thanks to concerns about supply and the improvement in the outlook leading to inflation risks.

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