That long weekend seems to have done wonders for U.S. investors. The day's key economic indicator rolls in below expectations, yet they continue to grin happily and whistle a cheery tune.
The Institute for Supply Management's non-manufacturing index - measuring activity in the huge U.S. services sector, which makes up roughly four-fifths of the country's economy - came in at 53.8 for June, down from 55.4 in May and below economists' consensus estimate.
Add it to the recent string of sluggish economic indicators and knock a few notches off the stock market, right?
Well, no. Not today.
Instead, stocks - after a knee-jerk dip the moment the ISM report was released at 10 a.m. (Eastern) - turned smartly upward in the wake of the news, adding to the day's early gains. Within 15 minutes of the report's release, the Dow Jones industrial average had tacked on another 50 points, putting it up more than 170 points on the day. And most of those gains are sticking in late-morning trade.
It's a bit hard to figure. About the only positive in the report was that it's still above 50 - which marks the break-even point between expansion and contraction. So, it's still growing, but slower than most people thought. Hardly bullish.
If anything, it fleshes out an increasingly bearish economic picture that has emerged in recent weeks, raising the possibility that U.S. earnings growth might be challenged for the rest of the year. It also doesn't say much for U.S. employment growth, as the services sector accounts for the overwhelming bulk of American jobs.
It would appear that, after wiping almost 10 per cent off stocks in the past two weeks, investors are determined to turn over a new leaf now that July has arrived in earnest. Perhaps the market has grown weary of the economic-slowdown play, and is ready to move on to other things.
After all, while the ISM non-manufacturing data do point to an economic slowdown in the second half of 2010, they still show positive growth - in other words, no double-dip recession in the signal. And since "slowdown but no double-dip" is pretty much the consensus call on the U.S. economy now, investors may be starting to consider this scenario to be adequately priced into stocks.