New York Stock Exchange building

The January rally in the stock market - record closings for the Dow industrials in six of the 10 trading sessions so far this month - is just one sign of an economy firing on all cylinders.

Remember, the stock market is a leading indicator. No one ever buys a stock hoping it will stay at that price for a long time. Obviously, they are anticipating the price will increase as the fortunes of the economy and the company improve.

Speaking of which, a couple of economic reports out today paint a very optimistic picture. First, retail sales in January rose by 0.4 percent. However, the numbers would have been significantly higher had it not been for a drop in auto sales, down 1.4 percent. Take out the weakness in car sales and retail sales would have been up 0.8 percent! Auto sales, of course, have been the most powerful engine for the economy in the last two years, averaging annual sales of 17.5 million vehicles, so a slowdown is no big deal.

And, the consumer price index, which measures the cost of living for us consumers, rose last month by 0.6 percent, the biggest monthly increase in four years. Over the past twelve months the CPI has been up 2.5 percent.

All of this is being digested by the Federal Reserve and it suggests another increase in short-term interest rates could happen as soon as next month.

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