Misleading article of the day: World markets surge as US data boost recovery hope
I always hate it when journalists, particularly headline writers, try to explain short term moves in the markets when they have no idea what they're talking about. Here's today's misleading article:
World markets surge as US data boost recovery hope
I can see the stock market rising in anticipation that some positive news might come out of G20, but the data that came out of the U.S. yesterday was anything but positive. Here's the quote that bothered me the most:
Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market.
When I heard people getting all happy about how the dismal auto numbers that were released yesterday were an improvement over February I decided to do some research. Not surprisingly, must like home sales, auto sales are very seasonal. Over the past five years, sales in March have been an average of around 20% higher than they were in February. That's approximately the increase that we saw month over month in 2009 as well.
OK, the increase this year was a couple of points better than that, but certainly not a statistically significant amount. Furthermore, some of the increase can be explained by the fact that sales tax was scheduled to increase in California by 1% in April. I have spoken with a number of people who pulled forward their new vehicle purchases in an effort to avoid this tax hike and California is one of the largest, if not the largest auto market in the U.S.
While sales certainly didn't fall off of a cliff, to me the March figures represent more of the same rather than evidence of improvement in market conditions.