Markets around the world were posting huge gains today after news of another European bailout agreement. The Dow Jones Industrial Average
This new agreement allows struggling European banks to receive bailout funds directly from the European Union’s rescue funds without counting against a country’s debt. The move lowered the high borrowing costs for both Spain and Italy, and gave confidence to markets that Europe might not weigh down growth as heavily as predicted. The new plan overshadowed other economic news, however, that should have given investors pause.
No more spending
Zero growth in personal spending is one reason that investors should worry. The Commerce Department reported a 0% increase in spending for June, which was the first flat growth since last November. Worse, it revised last month’s 0.3% growth in spending down to 0.1%. With less spending and less demand, companies might be in for a tough quarter if they’ve forecasted strong growth.
No more earning
While total personal income increased 0.2% in May, wages and salaries barely shifted upward, also making it the worst wage growth seen since November. And, while those who have jobs fail to earn more, those looking for jobs continue to struggle. Earlier in the week, initial unemployment claims totaled 386,000, while the previous week’s figure was revised upward to 392,000. These past few months have stalled the downward trend for claims:
US Initial Claims for Unemployment Insurance data by YCharts
A lack of confidence
The University of Michigan Consumer Sentiment Index registered at 73.2 for June, down from May’s 79.3. The index is calculated based on consumer’s expectations and current conditions. The decline in confidence, which makes it the lowest figure since last December, was attributed all to the feelings of households earning over $75,000 annually. In this group, only 24% expected to improve their finances in the coming year, while any negative sentiment in lower income households was offset by cheaper gasoline.
And the bad news from Europe
Investors were happy to ignore the negative domestic outlook in favor of bullish European news. Unfortunately, not all news from Europe was good.
Ford
Barclays
Keep in mind the long-term
Europe’s next move could roil markets just as easily as it could spark another rally, which is why trading on each bit of news can be tiresome. Instead, focus on long-term investments that don’t require constant attention. That will save you from any trading fees or commissions.
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