Justified or not, it happened.
The proximate cause for today’s rally – a big jump in the monthly ISM survey included stellar strength in New Orders. Plus, weekly jobless claims dropped to a level not seen since January of 2008 – five and half years ago.
In addition, global markets rallied overnight as China put up a non-scary PMI number and improvements seemed to be taking hold in Europe. The ECB’s Mario Draghi was dovish, as was our own FOMC yesterday.
The sequester has been a drag on the economy this year but it has reined in spending, cleared out some excesses. In the meantime, we’re growing slowly despite it. Earnings estimates for the S&P 500 are now trending up toward $120 a share putting us in fairly valued, but not richly valued, territory.