DJ30 -53.13 NASDAQ -31.65 NQ100 -1.7% SP500 -10.66
A better-than-expected GDP report couldn't keep stocks from selling off and logging their third straight weekly loss, which has left the stock market down nearly 4% since the start of the new year.
This came on the heels of Ben Bernanke's reconfirmation to Fed Chairman.
Earlier on, the final consumer sentiment survey for January from University of Michigan came in at 74.4, which is better than the 73.0 reading that many had forecast. This report hasn't helped stocks extend their morning advance either.
Pre-market participants already had the time to chew on another big batch of earnings announcements. Overall results remain pleasing as Amazon.com (AMZN) brought in better-than-expected bottom line results and issued upside guidance, while Microsoft (MSFT) also exceeded earnings expectations. Honeywell (HON) offered an upside earnings surprise, as well. By second session in the afternoon, market gave this a middle-finger!
Stocks started the session in positive territory (very positive territory it was indeed) and even made their way to a gain of more than 1%. The move was underpinned by an advance fourth quarter GDP reading that showed (i) Annualized quarter-over-quarter growth of 5.7%, which was considerably stronger than the 4.7% rate of expansion that had been widely forecast, (ii)
Core personal consumption expenditures (PCE) increased at an annualized quarter-over-quarter rate of 1.4%, which is slightly stronger than the 1.3% increase that had been expected.
Though Fed member Kohn indicated in a speech that interest rates are likely to stay near zero for an extended period if the economy follows the trajectory expected by the Fed, signs of strong economic growth brought back speculation that interest rates will be hiked sooner than later (may be this is the next It-thing -thus why market misbehaved over pretty statistics and numbers coming out today).
That notion drove the dollar 0.7% higher against competing currencies and put the Dollar Index at a fresh five-month high. The notion of a stronger economy also looked like it would reheat the reflation trade as Commodities and Natural Resource stocks climbed sharply. The energy sector climbed to a 1.7% gain, while the materials sector made its way to a 2.1% gain. However, both commodities and natural resource stocks then tanked, which culminated in a 1.4% loss for both energy stocks and materials stocks!
The two sectors had been the best performers in the early going, but ended the session among the worst performers! (Total Surprise-Totally contrary to the abovementioned expectation)
Tech dropped 2.1% to finish the session with the steepest loss. Given that tech carries more market weight than any other sector, its weakness in recent sessions has caused a considerable drag on the broader market. During the course of the past 10 sessions tech stocks have dropped more than 9%, leaving the S&P 500 to lose 6.5% over the same period.
Precious metals moved lower this session. Both gold and silver futures were volatile following the release of the Q4 GDP report: February gold closed 1.2% lower at $1089.70 and March silver closed 3.3% lower at $16.93.
Crude oil futures spiked higher in reaction to the Q4 GDP report, then crude oil futures trended lower for the rest of the session. March crude oil closed 1.0% lower at $72.88 per barrel. Natural gas futures traded with gains early in the session, but sold off as crude oil moved lower and the dollar moved higher. March natural gas closed relatively unchanged at $5.13 per MMBtu.
In a sign of conviction, trading volume on the NYSE surpassed 1.5 billion shares. That was the most action in one month. (This was really rubbing on the pain: some very powerful but stealth overlords behind the US equities market sold with abandon -in great volume and in great sell-off as all early gains were wiped out and still knocked away previous closing share prices).
Despite news that unemployment in the 16 countries that use the euro hit 10% in December for the first time since 1999, Europe's major bourses have extended their gains in the wake of upbeat GDP data from the U.S. (So, world-wide general consensus on interpreting the GDP results was unmistakably identical: good numbers=good news=good reason for market to move up).
In Asia, the final session of the week saw the MSCI Asia Pacific Index lose 1.7% and Japan's Nikkei drop 2.1%. Sellers kept the pressure on Toyota Motor (TM), too -- the stock has tumbled more than 10% this week. Honda Motor (HMC) was weakened by a stronger yen.
In Hong Kong, the Hang Seng fell 1.2% as investors banks fell under renewed pressure amid ongoing concern regarding Beijing's moves to curb lending. That left China Construction Bank and Industrial Commercial Bank of China to slide. 2.1% lower.
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