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MV Hunting Report: Markets Feed on Positive Econ Data


Rain or shine, we review the day's biggest stock stories.

Economic data stole the show today as the ISM Manufacturing Index reading and Construction Spending both came in better than expected. For the ISM index it printed a reading of 48.9 compared to estimates of 46.5, last month it came in at 44.8, a reading of 50 or greater shows expansion. Construction spending unexpectedly rose for the month of June to +0.3% compared to estimates of -0.5%, last quarter it came in at 0.9%.

From Friday's GDP number, to today's better than expected economic data, it's becoming hard to be bearish. The short side looks tempting but the data is telling another story. Today on the Buzz and Banter, Lance Lewis gave his thoughts on the economic data we have just seen.

"Unlike China's July PMI, which edged up to 53.3 and indicated continued expansion of China's manufacturing sector for the fifth straight month, the July ISM in the US remained below 50 for the 12th straight month, indicating that the US manufacturing sector not only remains in contraction but has been in that contraction for a full year.

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"Meanwhile, the prices paid index (which is the inflation component) squirted up to 55 from 50, which was its second month in a row to be in expansion territory following its 8-month stint below 50 that began back in October.

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"Let's see… What is a weak economy plus rising inflation called? Oh yea… Is that a little stagflation I smell?

"Given that stagflationary sandwich of data, is it any wonder that the dollar is continuing to melt down today? Predictably, the melting dollar is also putting a bid underneath virtually everything that is not nailed down this morning.

"All asset prices may benefit from the weak dollar and rising inflation to some degree early on (especially in a hyperinflation), which means stocks may continue to rise as well, but hard assets and claims on hard assets will vastly outperform, especially gold."
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