With an hour left in the trading day, US stock indexes are down about 1.8% on a day where the economic data was better than expected.
The Institute for Supply Management's August index of manufacturing activity increased to 52.9 from 48.9 in July — it was the first time since January 2008 that the index was over fifty, which is seen as the line between expansion and contraction. Additionally, the National Association of Realtors reported that its index for pending sales of previously owned homes rose 3.2% in June, more than double expectations. It was the sixth consecutive increase, adding to hopes that the housing downturn is bottoming.
Offsetting the positive news was a Commerce Department report on construction spending, which showed a drop of .2%. While residential construction spending increased by 2.3%, commercial construction fell 1%. But this one report was not the reason for the sell-off.
Here are five reasons stocks are down today:
• This is my favorite: there are more sellers than buyers
• Stock valuations have gotten ahead of economic realities
• Smart investors and insiders are taking profits after an awesome 50% run up since the March lows• Economic data is improving, but we have a long way to go in this process
• Resurrection of the "bear market rally" thesis
I made a guest appearance on CNET's "The 404" to explain some of these points. The bonus: I got to laugh with my pals Wilson, Justin and Jeff.