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Markets rally, but don't rule economic fate

December 21, 2011 - Mike Maneval
The stock market surged on Tuesday, with the Dow Jones Industrial Average performing well enough to jump 337 points and end a month-long stretch without losses, according to CNN and the New York Times. The Nasdaq and Standard and Poor's markets also saw gains for the day. So what does it all mean?

Very little, and by itself, nothing. If nothing else should be clear from the past decade - particularly the past several years - the stock markets are a poor indicator of economic health. On Dec. 12, the markets dropped sharply, according to the Christian Science Monitor, with the Dow losing 243 points in one afternoon. On Dec. 7, reports, the Dow Jones rose to reach its highest level since October.

Tuesday's rally was aided by a number of factors: The death of Kim Jong-Il's impact on Asian markets, lower borrowing costs for Spainás government, and slight relief to pressures on the U.S. housing markets, among others. And all of these, it could be argued, have a greater impact on the economy and its potential recovery or stagnation than the volatile markets.


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