Tuesday, November 24, 2009

Stocks Slightly in Red Amidst Heavy Economic Data

With investors digesting an avalanche of economic data, stocks spent the entire session in the red, even though the major indices finished with modest losses by day's end.

The overall tone was set early on, when the government reported its first revision to 3rd quarter GDP, which came in exactly at the estimates, showing the economy grew at a 2.8% annualized pace. That seemingly wasn't good enough, as futures fell immediately after the reading.

At 9:00 am, the S&P/Case Shiller 20-City Home Price Index showed a decline of 9.4% for September, slightly more than estimates. That reading didn't help matters, nor did a positive reading on consumer confidence - 49.5, up from 48.7 in October - at 10:00 am.

The negative tone was exacerbated by a stronger US Dollar, discouraging the normal risk trade. At 2:00 pm, minutes from the latest FOMC meeting of the Fed (Nov. 3-4) were released, and that seemed to calm some nerves into the close. What was revealed in the minutes was unsurprising, as the Fed saw industrial production improvements, slight increases in personal expenditures, low inflation risk and continuing high unemployment.

There was some actual discussion amongst the participants concerning the ever-decreasing value of the US Dollar, though overall the committee was unfazed by what they say as a natural, orderly unwinding of "safe-haven demand" as the economic conditions stabilized around the world. With that kind of language coming straight from the Fed, investors should be quite a bit less concerned that the dollar is going "off the deep end" in relation to other currencies, and about to lose its favored reserve status.

Dow 10,433.71, -17.24 (0.16%)
NASDAQ 2,169.18, -6.83 (0.31%)
S&P 500 1,105.65, -0.59 (0.05%)
NYSE Composite 7,170.26, -16.07 (0.22%)

On the day, simple indicators were in line with the headline numbers, with declining issues beating back advancers, 3658-2799. New highs exceeded new lows, 186-65, and volume continued to poke along at the new-normal pace.

NYSE Volume 4,345,491,000
NASDAQ Volume 1,873,632,375

Commodities were mixed, as they have been in recent days. Crude oil futures continued to slip, down $1.54, to $76.02, the lowest level in more than two months. Gold gained $1.90, to $1,166.60, though silver dropped 16 cents, to $18.49.

Tomorrow's trading will again be influenced by economic data, including readings on personal income, weekly unemployment claims, durable goods orders, another consumer sentiment reading from the University of Michigan, new home sales and crude inventories. With all that to consider throughout the day, traders will likely be giving thanks just to get away from the flurry of facts, numbers and statistics being thrown about.

After the one-day holiday on Thursday, markets will be open for a half-session, with everything shutting down at 1:00 pm on Black Friday. With retail's biggest one-day event as a backdrop, the focus will be turning from drab economic data to how robust or dull the holiday shopping season will be. Estimates have been somewhat tempered, with most calling for only slight improvement from last year, which was one of the worst on record.

Any anecdotal evidence from Black Friday will make for another spurt in the indices, which are close to a high point, even though the usual talk of the market being "tired" has not surfaced of late. There could be another 5-10% or more left to run before the year is out, as stocks do not seem to want to stay down for long, as has been the case since the beginning of the rally back in March.

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