Stocks Notch Up Gain to End a Robust 2013
Stocks in the US started the last trading session of 2013 in the black, capping off a year in which the equity bourses notched up robust gains. A return to growth and very accommodative monetary policy fueled U.S. stocks to close their best year since 1995. For the year the large cap S&P 500 index closed up 32% when including dividends. Stocks gained momentum throughout the trading session with all three major averages closing in the black. The technical picture for stocks remains strong and gains are likely to be seen in the first few months of 2014.
Growth in the US surprised investors for the third quarter notching up a 4.1% gain. Although there is a chance that this could be repeated in the Q4, the expiration of emergency jobless benefits is headwind unless renewed. There are several bills proposed to do this, but House Republican leadership insists on new spending cuts in exchange for a new extension.
Almost 1.4 million Americans have already lost the emergency jobless benefits and another 2 million will by mid-year. The $24 billion reduction in government spending will slice approximately 0.3% from GDP, according to various estimates. It will impact income and consumption. The reduction in payments will have an effect of reducing the labor force, making the participation rate fall, and weighing on the unemployment rate.
The Conference Board, reported that their index of consumer confidence bounced back to 78.1 in December, from a revised 72.0 in November. It is the highest reading since September. The December index is better than the 76.5 expected by economists surveyed.
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