Will Obama's Jobs Plan Work?
The market did not do much yesterday. The indices started the day moving higher, but around noon they fell back and closed in the red.
The decline was entirely expected and needed. Many indices had moved up 6% in two days, so it was natural that they consolidated yesterday, especially with no news.
Today, there is plenty of news, but not much of it is good news. German CPI and U.K. producer prices came in hotter than expected. Also, in an effort to maintain liquidity, news leaked that Bank of America (NYSE:BAC) is poised to cut 40,000 workers.
Lastly, the Obama plan was announced last night. The Obama plan to create jobs sounds great. But it doesn't look likely to pass. Obama announced a $447 billion jobs creation plan last night, $147 billion more than expected. About $255 billion is for payroll tax incentives to hire new workers.
Obama all but said that Republicans vow to never increase taxes, so they must pass this tax break for the middle class. While not the best way to spur job growth, it will not hurt.
The remaining amount will be shuffled between the states and go towards infrastructure spending. While I think that is a great idea, the Republicans are likely to block it.
The President laid out a plan yesterday that in most times would have juiced the market. But instead of a big gain today, we may even see a loss in the stock market.
Investors have no confidence in politicians' ability to make important decisions. Based on the negative Republican response yesterday, any decision is likely to wait until December, so even if the plan eventually is passed, it will look a lot different in three months.
Today should be another slow paced day in the market. The Asian indices were slightly lower and the European indices have mild losses too. The economic news is light today, and the U.S. indices will likely consolidate for a second day.
I may enter some new longs around 1175. And it would be a bullish sign if the indices can make a late day push higher.
