Economic Outlook Worsens, Stay In Cash

David Altig at Macroblog on "summarizing the general state of the labor market":

WASHINGTON — The Federal Reserve ramped up its stimulus to the economy on Wednesday, expressing disappointment with the pace of recovery in employment as contentious U.S. budget talks heighten uncertainty about the outlook. The central bank replaced a more modest stimulus program due to expire at year-end with a fresh round of Treasury purchases that will increase its balance sheet. It committed to monthly purchases of US$45-billion in Treasuries on top of the US$40-billion per month in mortgage-backed bonds it started buying in September.

Why Spanish debt was Rated "A" for as long as it has been remains a mystery. Indeed BBB+ seems like a gift. Nonetheless, expect howls from Europe as Spain Cut by S&P for 2nd Time This Year on Banks, Economy. Spain's sovereign credit rating was cut for the second time this year by Standard & Poor's on concern that the country will have to provide further fiscal support to banks as the economy contracts.

Chris Damas submits: The US stock market rally turnaround after a nine day sell-off is impressive and has “legs” in my opinion. As soon as I see the “Most Wanted” PermaBears in the media (David Rosenberg in the Globe and Mail a day ago, Nouriel Roubini cancelled his morning interview on CNBC) trotting out their overly-used arguments that the market bull rally is speculative and therefore “false” (because they missed the call), I get more bullish and want to buy my favorite businesses.

After a bounce on the relief from the fiscal cliff deal that took place on New Year’s Day, the stock market has been in a sideways holding pattern. Investors are waiting to see if there was some collateral damage from the battle over the fiscal cliff. This week, we will begin to see if any damage was done to corporate profits in the fourth quarter of 2012.

By Kapitall:Do you follow sell-side analyst research reports? For a closer look at stocks that analysts at Barclays expect to outperform, we ran a screen. We began with a universe of stocks currently rated "Overweight" by analysts at Barclays, indicating they expect these names to outperform. We then screened these stocks for those that are expected to have high growth, with 5-year projected EPS growth above 15%.

This article is a combination and update of two posts published separately a few weeks ago.Stock markets have been heading north over the past few weeks while market commentators question the health of the world economy and especially the situation in the U.S. and China. But who is right and who is wrong? This very question prompted me to look at the ability of stock markets to anticipate the fortunes of the underlying economies.

Dr. Stephen Leeb submits:Last week's 512 point gain on the Dow managed to wipe out the losses from the previous week, returning the market to the trading range it's been mired in since last September and assuaging fears of a bigger sell-off ... for now. But before we breathe too big a sigh of relief, let's keep in mind that the market will probably take its short-term cue from corporate earnings, the most recent reports of which will start to come in this week.