The US unemployment rate increased during the last three months and reached 9.2%. Even so, in a long-term perspective, a high unemployment is on its new "normal" level and a small increase looks rather as a noise, not a strong signal. Also normally, unemployment rate is considered as a lagging indicator and does not indicate what will happen in the future. Often, unemployment numbers continue to increase even after the economy is recovering because businesses are reluctant to hire new employees.
After careful consideration some analysts have made a conclusion that ending the bond-buying program can actually have a positive effect on the market. Although US housing is not changing, it is in almost the same bad shape for two years without strong factors that may prevent it from positive moves. The factory orders increased in May. Oil price is down that helps the economy to gather a recovery momentum. Credit availability and business investments are improving.
From quarter to quarter, corporate earnings are fluctuating and it might be a sign that the economic recovery is in a early developing stage. Many chronic problems did not disappear yet but their influence is already reflected in the indexes. Everyday bad news have almost no effect on a strengthening market. July opens second-quarter earnings season. In terms of valuation, the stocks are trading now at attractive levels and if corporate balance sheets still remain healthy, almost nothing left to prevent the stock market from advancing to new highs.
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