This is the final trading day of what’s turned out to be a very good week for stocks. Frankly, it’s about time. I want to caution investors not to get too excited about the turnaround. Investors should continue to focus on fundamentally superior stocks. This is not a market that will not lift all boats.
The morning, the Labor Department reported that the price of imports fell for the seven straight month in February. This means that inflation is under control for the time being, but I don’t expect that to last. This is why I strongly favor commodity related stocks. Wall Street economists expected import prices to fall by 0.7% but the report came in at minus 0.2%. When we exclude petroleum, import prices fell by 0.6%.
We also saw that the trade deficit narrowed by almost 10% in January to the lowest point in six years. In short, American consumers basically cut back on everything. Exports fell by 5.7% while imports dropped by 6.7%. The fall in imports was largely due to the plunge in oil prices.
The Federal Reserve also released its flow of funds report which shows that U.S. household wealth dropped by $5.1 trillion during the final three months of 2008. That’s the result of the housing bust and stock market crash. American household wealth now stands at $51.5 trillion. For all of 2008, wealth fell by $11.2 trillion.
The market is up today, so at least we’re making some of it back.