Rally resumes despite soft economic data

The Dow Jones is on course for one of its best weeks of the year so far and the three major US stock index benchmarks are all up substantially for the week, amidst a clutch of disappointing economic reports.

Unless something drastic happens between now and the close, the Dow, S&P and NASDAQ are headed for their second week of gains in a row. The Dow has advanced over 3% this week, its best performance since January.

By early afternoon in New York, the Dow was up 0.41% or 62 points at 15,362, led by a 3% rise in Intel. The S&P 500 rose 0.24% to 1687.5 and the NASDAQ 100 was unchanged.

There was a flurry of reports earlier, none of which paint a particularly rosy picture of the US economy. Retail sales increased by 0.2% in August, below expectations for a 0.5% rise, although July’s sales were upwardly revised from 0.2% to 0.4%. Outside of motor vehicle sales, most components in the report were flat, which suggests anaemic growth-prospects for the economy, after a robust July.

Consumer sentiment has waned in September, according to the latest survey from the University of Michigan. The consumer sentiment index fell to 76.8 in the preliminary reading for September, down from August’s final reading of 82.1. The expectations component was particularly weak, and suggests the possibility that August’s slowdown in retails sales might continue in September.

The producer price index increased 0.3% in August, more than expected, but the core rate, which excludes the volatile component of food and energy, was unchanged. Expectations here were for a 0.1% rise.

The softness of today’s data suggests that should the Fed decide to taper at its policy meeting next week, they are likely to introduce only a small decrease in their monthly bond purchases.

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