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Why stock market is spinning its wheels despite positive trends

Consumer income and spending are up, but the stock market has been largely stagnant since February. Two big trends could be behind the Dow's tepid spring.

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Specialists confer on the floor of the New York Stock Exchange Wednesday. US stocks were headed for a neutral opening, with Dow Jones industrial futures nearly unchanged.

Richard Drew/AP

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First it was the jobless recovery. Now it seems like the joyless recovery. Despite gains in personal incomes and spending for March, the US stock market sagged Monday.

The Dow Jones Industrial Average spent the morning in negative terrain, compared with Friday's close, and that's part of a broader trend.

After rising in this year's early weeks, the widely watched Dow index has been treading water since February, a little below or above the 13000 level.

What's holding back investor spirits?

Corporate profits, after all, have reached historically high levels, yet the Dow's level of about 13200 Monday remains well below the pre-recession peak (about 700 points above that).

Two factors appear to be important:

  • America's economic momentum, embodied in the news about consumer incomes and spending, is still tepid.
  • The US is currently the patch of green in a global landscape characterized by the economic equivalent of a drought in Europe and storm threats in China and Iran.

Here's what the Commerce Department reported: Personal income in the US rose 0.4 percent in March, and spending rose by a similar amount, 0.3 percent. Not racing forward, especially when inflation is taken into account, but those are steps of progress.

"The good news in this report is the strength in income," said IHS Global Insight economist Leslie Levesque in a written analysis. "For the first time this year, growth in income ... was in positive territory" even after adjusting for inflation and taxes.

Consumer spending, also rising faster than inflation in the government's report for March, represents the vital bulwark of economic growth. When incomes are rising and consumers spend, business tend to increase hiring.

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