Stocks Close Down for 4th Consecutive Day
Stocks started the trading session on a mixed note as investors continue to grapple with economic data. Today’s second look at GDP reported by the Commerce Department was much better than expected, but the increase was likely due to climbing inventories which will be sold off and not replenished during the 4th quarter. Jobless claims continued to impress which could be a precursor to Friday’s government non-farm payroll report.
The current economic environment will make it difficult for stocks to gain traction and hold support level. Better than expected economic data is driving yields in the US higher. This in turn is making the US dollar more attractive as investors can hold dollars relative to other currencies and pick up a yield differential created from higher US interest rates. A stronger dollar erodes large cap international earnings which generate headwinds for stocks. After the stronger than expected GDP and Jobless claims the 10-year yield moved higher hitting 2.87%.
Prior to the opening bell, the commerce department released its second look at GDP. According to Census Bureau, GDP increased to 3.6% in the third quarter compared to the 3% expected by economists, and the first look which printed at 2.8%. Jobless claims were also impressive. According to the labor department initial jobless claims declined to 298K, versus the 310K expected by economists. The 298K print was the first print below 300 since 2008.
Stocks were on the defensive for most of the trading session. The S&P 500 index moved lower through the 20-day moving average. Momentum is pointing to lower prices as the MACD (moving average convergence divergence) index generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.
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