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2 forces propel stocks higher

By Greg Guenthner ·
Monday, January 28, 2013
Posted: 3 pm ET

The market continues to charge higher despite uncertainties surrounding another looming debt ceiling debate in the Senate.

Political strife during the first three weeks of 2013 hasn’t yet quenched investors' thirst for equities. The Dow Jones Industrial Average has gained more than 6 percent to begin the year. Standard & Poor's and Nasdaq aren’t far behind.

So why are stocks moving higher amid potential political and economic troubles?

Confidence is a key issue. Two improving data points are helping lure individual investors back to the stock market. Both metrics have a profound effect on how we view the state of the economy -- and how willing we are to accept risk.

It all comes back to jobs and real estate.

Jobless claims fell again last week to 330,000, marking the second straight week this number reached five-year lows. During the height of the financial crisis and subsequent recession, jobless claims peaked at a high of more than 660,000 per week.

The housing market has also staged a spectacular comeback. According to a New York Times column authored by S&P/Case-Shiller Home Price Index co-creator Robert Shiller, "A number of indicators are up, including data for housing starts and permits as well as the National Association of Home Builders/Wells Fargo Index of traffic of prospective homebuyers, which has made a spectacular rebound since last spring."

This doesn’t mean a new housing boom will grip the country. Instead, it points to stability. Interest rates remain at record lows, foreclosures are down, and housing starts are trending higher. After almost seven years of decline, the national housing picture is looking much healthier.

Both jobs and housing data greatly influence the investing public and how it perceives risk. With real estate markets picking up across the country, the net worth of the average consumer is stabilizing. As fears of continued layoffs and cost-cutting measures subside at many workplaces, investors who were wary of the markets for more than a decade are looking for ways to put their money to work once again.

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