EmailThe performance of the equity market was wide open for interpretation yesterday.
The spin was bearish in the early going when the major averages were all down noticeably. The spin turned bullish by the close, however, as an afternoon rally effort helped the Dow and S&P 500 eke out a slight gain and the Nasdaq recoup a hefty portion of its losses before ending with a 1.0% decline.
Days like yesterday are prone to be met with over-analysis. Some things are better left unsaid. Let's just say, then, that the equity market was mixed on Wednesday and that just about any rationale one wants to use for that performance could apply, whether it was the actual reason or not.
'Tis the season for seesaw action, with trading volume light and visions of a holiday break dancing in everyone's head.
At the moment, the seesaw is tipped up. The S&P futures, spurred on by 1.0%+ gains in major European markets, are trading 0.2% above fair value.
Interestingly, the market has not been unnerved -- not yet anyway -- by the Italian 10-year note yield moving back to 6.73% or the continued lack of an agreement on the payroll tax cut extension.
Corporate news is light. Bed Bath & Beyond (BBBY) posted better-than-expected quarterly results and issued FY12 guidance that was above the current consensus estimate; Micron (MU) missed the Capital IQ consensus earnings estimate by nine cents; and Yahoo! (YHOO) is reportedly considering monetizing its Asian assets.
The economic calendar, on the other hand, is not light. It features five releases today, with the weekly initial claims and the third estimate for Q3 GDP before the open, and the University of Michigan Consumer Sentiment, Leading Indicators and FHFA Housing Price Index reports between 9:55 a.m. and 10:00 a.m. ET.
Consistent with our "mixed" theme above, the initial claims report was better than expected while the GDP revision was worse than expected. For the week ending December 17, initial claims declined by 4,000 to 364,000 (Briefing.com consensus 380,000). That is the lowest level of initial claims since April 2008. This is an important mark, too, because it covers the survey period for the December employment report and is suggestive of nonfarm payroll gains being well above 100,000.
The four-week moving average for initial claims dropped by 8,000 to 380,250.
Continuing claims for the week ending December 10 fell by 79,000 to 3.546 mln (Briefing.com consensus 3.650 mln), which lowered the four-week moving average for this series by 40,000 to 3.632 mln.
Separately, the third estimate for Q3 GDP dropped to 1.8% from 2.0%. The downward revision was owed primarily to a reduction in PCE growth from 2.3% at the time of the second estimate to 1.7% today. That revision lowered the PCE contribution to real GDP growth by 0.4 percentage points from the second estimate.
An upward revision to private inventories, however, acted as a partial offset, adding 0.2 percentage points to the third estimate for Q3 GDP.
The futures market bobbed up and down after these releases and is actually a bit lower than where it stood just ahead of the releases.
The claims data, frankly, should take precedence for participants because it has leading indicator status while the GDP revision is backward-looking. Why it hasn't is open for interpretation.
Seeing that we are back to where we started, we will end here and simply watch today's action unfold.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
