Fears Continue to Subside As Positive Data Kick-starts August

Market fear continues to subside drastically following a peak six weeks ago. Fear about the insolvency of European banks -- which was a basic staple of bear analysts has now proven itself to be grossly overblown. And as the fear about Europe has subsided so has the VIX S&P Volality Index

(chart source: yahoo finance)

The index -- which appeared to be on its way to 50 at the height of the European Crisis -- now appears to be headed for the teens again.

And there were plenty of signs this week that August news will continue to calm the markets.

1.  The Institute for Supply Management released 2 reports this past week.  Pointed to continued growth in both the manufacturing and non-manufacturing service sectors.

2.  Construction spending -- which was forecast to decrease -- actually increased during the June reporting period.

3.  Domestic motor vehicle sales for July came in stronger than most economists had predicted.

4.  According to the most reliable retail indices, the retail sector (which accounts for nearly three quarters of the US GDP) continues to growth at a healthy rate between three and four percent year over year.

5.  The mortgage purchase index for the purchase of new homes has now been up for three weeks in a row.  Refinancing and purchase interest rates continue to fall.

6.  Although jobs creation is always the last sign of a healthy recovery, the private sector is now clearly beginning to add jobs -- ADP reports + 42,000 private sector additions and the U.S. government calculated 71,000 additions in July.  The return to jobs growth can be argued as the quickest return to growth from a recession than at any point in modern U.S. history.

7.  It is now clear -- as evidenced by earnings calls and transcripts -- that the majority of U.S. businesses have returned to profitability.  Not only have the majority report Q2 results better than expected, but the majority now forecast continued growth and profitability into the end of the year.

And investors are finally starting to agree with the positive business assessment.  Not only is the VIX index on a steady decline, but stock markets finished the first week of August up nearly 2 percent for the week and over 6 percentage points year to date.