US stocks fell for a third day on Thursday, sending the S&P 500 down 0.4 percent to a one-month low.
Stocks fell as a report on Thursday showed that US retail sales rose 0.7 percent in November, raising the probability of the Federal Reserve reducing monetary stimulus soon.
European stocks also fell for a third day. The STOXX Europe 600 fell 1.0 percent on Thursday to a two-month low.
Unlike the US, the declines in stocks in Europe were accompanied by negative economic data. Industrial production in the euro area fell 1.1 percent in October, the steepest monthly decline in more than a year.
Apparently, the prospect of a reduction in monetary stimulus from the Fed outweighed the prospect for further easing from the European Central Bank.
Or perhaps stocks are just overvalued. Zero Hedge notes that at the moment, “Tobin's Q (a valuation indicator based on market 'price' versus 'asset value' for non-financial companies) has only been higher at the peak of bubble exuberance”.
On the other hand, Joshua Brown notes that according to Savita Subramanian at Bank of America Merrill Lynch, out of 15 valuation metrics that they looked at, “12 of the 15 metrics suggest the S&P 500 is trading below historical average levels... Only the Shiller P/E...suggests the market looks very stretched”.
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