Stocks are pushing ahead in afternoon trading, as bullish sentiment received a boost from today's report by ADP that private-sector employment grew by 201,000 in March.
With slightly under two hours left in today's session, the Dow Jones Industrials are up 91 points to 12,370, the S&P 500 Index is up 11 points to 1,330 and the Nasdaq is 20 points higher at 2,777.
A realization that the spike in crude oil prices tied to the instability and the Middle East and the massive earthquake that rocked Japan does not appear to be materially impacting the U.S. recovery are helping to fuel recent gains in shares.
Investors are also optimistic that Q1 earnings season, which officially begins in April, will show that the economic recovery continues to fuel a surge in profits. Moreover, the Fed's plan to buy $600 billion in longer-term Treasury securities is adding to the favorable backdrop.
So what happened? Just a few weeks back, skyrocketing oil prices, coupled with a nuclear disaster in Japan that remains unresolved, sent investors scurrying out of stocks amid concerns that higher energy prices would stifle consumer demand. And the unexpected tragedy in Japan added to the uncertain mood.
Stocks had soared over 30%, as measured by the S&P 500 Index, from the lows last June, as the economy avoided a double-dip recession, growth accelerated, earnings remained strong and the Fed embarked on QE2.
With optimism rising to dizzying heights, a spate of unexpectedly troubling news was enough to force a bout of profit taking, eliminating some of the excess optimism that had permeated the market.
Although the spike in gasoline prices is frustrating for motorists and has taken a toll on consumer confidence, it is not enough to derail the expansion in my view, as the $15-20 billion hit from higher crude prices is dwarfed by an economy that reaches nearly $15 trillion. Futher, other forms of energy such as natural gas have not jumped in price.
Hence, with stocks approaching multiyear highs, the market is telling us that the further gains in the economy are likely in the coming months.
For more information about current issues impacting the economy, including a look at surging commodity prices, please see Tomorrow's Economy Today.
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