In a curious pairing of news from the US yesterday, 598,000 people found themselves newly unemployed in January, and the unemployment rate rose to 7.6%. At the same time, US stock indexes all rose between 2 and 3 percent.
Why would stocks react positively to such dire economic news? Two reasons I can think of, both probably contributing to the optimism of speculators/investors.
One, it is likely that many expected the news to be worse than it was. When news came out that unemployment rose to 7.6%, investors were probably relieved that it was less than the 7.9 or 8% that many had expected.
Two, it was also reported that crude oil prices fell, which lowers production and transportation costs, and could spur investment without many more incentives.
Another report suggests that the bad economic news will improve chances that Obama’s stimulus package will be approved by the US Senate.
Nonsense. The mostly partisan debate about the stimulus bill involves petty political staging, and idealogical differences on the value of deficit spending. Bad economic news will not influence either.