The market heading down as I write. The market is down because the economy is doing well.
U.S. stocks fell on Tuesday, after upbeat comments on the economy from Federal Reserve Chairman Ben Bernanke and better-than-expected service-sector data reduced hopes that the Fed would cut interest rates, lifting bond yields to challenging levels.
"There was nothing new there, which makes it seem that the Fed is going to stay on hold," said Peter Cardillo, chief market economist at Avalon Partners.
The ISM nonmanufacturing index rose to 59.7% from 56% in April. It's the highest since April 2006. Economists surveyed by MarketWatch were looking for a pullback to about 55%.
Many would wonder why the market falls because the economy is doing well. I believe that the market is a discounting mechanism for the future, looking out about 6-12 months. This would mean that the market has already priced in a stronger economy.
In addition, the market has been rallying and probably needs to consolidate and take a breather. It's tough to forecast a correction or pullback, although the summer months has historically been a likely resting spot.