Friday, July 30, 2010

Limited Market Reaction to 2Q GDP

Released an hour prior to the opening of the markets on Friday, the Bureau of Economic Analysis, U.S. Department of Commerce said second quarter GDP in the US was running at a 2.4% annual growth rate.

That was unsurprising. What did raise some eyeballs was the revision, by an entire percentage point, from +2.7% to +3.7%, of first quarter GDP. The large increase was likely due to the annual three-year revision the BEA undertakes each July. Since 2007, 2008 and 2009 were mostly revised downwardly, that made the first quarter of 2010 look better than it actually was, since the increase was based from lower overall figures.

It's a nice accounting trick, though in real terms, it means that the first half of the current year was hardly worthwhile. Real, unadjusted growth was likely negligible once one wades through the various modeling and statistical fudging done to the numbers.

Oddly enough, the whiz kids on Wall Street didn't quite know what to make of it all, settling instead to just churn stocks around the flat line after rebounding from a nearly 1% loss at the open. Being the final trading day of July, it was a little too neat to take seriously. The best that could be said is that nobody was in a mood to panic, at least not just yet.

Dow 10,465.94, -1.22 (0.01%)
NASDAQ 2,254.70, +3.01 (0.13%)
S&P 500 1,101.60, +0.07 (0.01%)
NYSE Composite 6,998.99, +4.42 (0.06%)

Market internal were a whole other matter, as advancers clocked past decliners, 3708-2708, and new highs were once again well ahead of new lows, 280-90. Volume was just a touch under average for mid-summer.

NASDAQ Volume 2,168,665,750
NYSE Volume 4,697,753,000

Oil finished another 59 cents higher, at $78.95, for the September contract. Gold added $12.20, to $1,183.40, and silver tacked on 38 cents to close at an even $18.00 in New York.

For all the emphasis put on the first GDP estimate for the second quarter, the resulting trade was anything but exciting. The Dow traded in a range of 160 points top to bottom, but mostly in a tight pattern which deviated less than 30 points in either direction off the previous close.

One can safely assume that markets will experience more volatility come Monday and in ensuing sessions, as current market conditions remain quite unsettled.

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