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It’s been a quiet day on Wall Street. While news that Actavis will acquire Forest Labs in a $25 billion deal sparked a 28% jump in the latter, it did little to spur on the wider market, just as worse-than-expected economic reports failed to push the market lower.
If we are to judge the US economy on the most recent economic reports, it would appear that activity is cooling somewhat. The last two official employment reports have been disappointing in a big way, several indicators have pointed to manufacturing slowing substantially and housing appears to be going off the boil. Today’s sizeable drops in Empire State Manufacturing and the NAHB housing market index for February add further evidence to these two latter points.
It’s debatable how much of this is down to the weather or not, but with data largely soft during the course of the last week’s rally (the biggest weekly gains for Wall Street so far this year), what is clear is that the gains were once again more to do with the Fed than the health of the economy.
Last week we saw the US stock market thunder higher after new Fed Chair Janet Yellen said nothing to suggest monetary policy would be deviating from the Fed’s existing path. Given that strongly positive reaction to a ‘more of the same’ message, it will be interesting to see how the market reacts to the minutes from the last FOMC meeting. I will be particularly drawn to anything that reveals how concerned committee members were by volatility in emerging markets or by the recent weakness in employment.
Before the Fed minutes tomorrow, we have more housing data with January’s housing starts and a steer on inflation at the wholesale level with the producer price index.