By Greg Peel

The Dow closed up 100 points, or 0.7%, while the S&P jumped 1.0% to 1588 and the Nasdaq added 0.8%.

After the Fed introduced QE1 in 2009 and Wall Street started to look for QE2 in 2010, the US turned upside-down to the point where good economic news was bad and bad news good, given bad news meant more stimulus. This theme continued into Operation Twist and QE3, but began to break down as we entered 2013 given a genuine enthusiasm for the stock market in a recovering economy.

Yet the response this past month to Fed taper talk suggests Wall Street is not yet ready to see stimulus removed, which would tend to suggest good economic news should be bad news again. But no. Last night the data were all positive, and Wall Street rallied.

Sales of new homes rose 2.1% in May to 476,000, exceeding economist forecasts of 464,000. Sales rose despite a sharp reversal in mortgage rates over the month from 3.5% to 4% as bond prices responded to taper talk. US mortgages are sensibly priced off thirty-year rates and not ridiculously priced off the overnight cash rate, which happens in only about one country in the world.

The Case-Shiller 20-city house price index jumped by 2.5% in April to mark a record monthly rise since the index was introduced in 2000. Year on year prices are up 12.1%, and now the concern is prices are rising too quickly and pricing out genuine buyers. Heard that one before somewhere else as well. Prices remain about 25% below their 2006 peak. The action might be concentrated in the higher end, given economists were expecting a 1.1% rise in the FHFA house price index in April, but the result was only 0.7% for 7.4% year on year growth. FHFA measures prices under Fannie/Freddie sponsored mortgages, which are limited to $417k for a family home. At this level, prices are only 12% below their peak in 2007.

Consumer confidence, as measured by the Conference Board, rather shocked. Economists were expecting a fall to 74.0 this month from 74.3 in May given the fear and loathing generated by taper talk, but instead the index jumped to 81.4 to its highest reading since January 2008, pre-Lehman.

New durable goods orders growth for May was not quite as exciting, although these numbers need some drilling down. Big aircraft orders pushed the headline number to 3.6% but the ex-transport growth was only 0.7%. The number within the headline that is used to calculate GDP is "core capital goods" orders, which grew 1.7% after falling 2.0% in April, so all up economists called the result a win.

Finally, the index of activity in the Richmond Fed district for June leapt to plus 8 from minus 2 in May, to mark its first expansion since March and best reading since November.

Arguably we have now seen the necessary knee-jerk panic reaction from flighty investors, and the smart money has noted that just because the Fed has outlined a data-dependent tapering timeline doesn't mean that timeline won't be carefully tweaked. In other words, value has reappeared, and good news is, well, just good news. With the genie out of the bottle on Fed policy, Wall Street can simply get on with it, as if life were "normal" once again.

There remains a possibility that when the Fed does actually begin tapering, which could potentially happen as early as September, or at least be pre-announced in September, we could see another leg-down on similar panic. But talk on the business channels has become a lot more positive than it was back in April, when smart traders were scratching their heads over clear over-exuberance.

By contrast, there's been a lot of dooming and glooming downunder. But the big correction, which has now seen all 2013 index gains wiped out, has brought yield stocks back to reality and the currency correction has offered up strong earnings growth potential for beaten-down sectors. And no matter what your stripes, it is clear a new government in this country, any new government, can only be a positive for business and consumer confidence.

All Australian eyes are on China of course, and yesterday the local market tracked Shanghai after it opened late morning Sydney time. The Chinese index initially tanked once more, but rebounded mid-session to close little changed. The bounce was sparked by a comment from a PBoC official that the central bank will guide Chinese interest rates to "a reasonable range", and that volatility in China's money market was only temporary.

These comments calmed markets across the globe that had been shocked these past few sessions by the sudden Shibor crisis. The comments emphasise the belief that Beijing is pulling the strings. The Australian market recovered from earlier steep losses, while Wall Street woke to the news. US traders were thus able to focus on solid local data without a Shibor cloud hanging over. Shaboom, shibor.

The US data pushed the US dollar higher, up 0.2% on its index. This was not good for gold, which fell US$4.40 to US$1277.90/oz. The US ten-year yield ticked up another 4bps to 2.59%. The stronger greenback did not impact on the beaten-down Aussie, which is steady at US$0.9259.

A stronger US dollar is not encouraging for commodities, but base metals played a different game in London last night. Asian traders came in with early selling, pushing prices down to technically significant levels. Buyers stepped in, and the solid US data provided the impetus for a short-covering snap-back. Copper closed up 1%, and nickel and lead up 2%.

The oils took a breather last night, with both crudes little changed. Spot iron ore was not so placid, dropping another US$2.60 to US$114.00/t.

The SPI Overnight was up 26 points, or 0.6%.

Tonight will see the final revision of the US March quarter GDP ahead of the first June quarter estimate. That news is getting a bit old.

Rudi will appear on Sky Business this evening at 5.30pm.