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Q2 GDP Great, Data Sucks, Markets Decline Then Recover

August 29th, 2013
in Gary's blogging, market open

Written by

Opening Market Commentary For 08-29-2013

Premarket was up (+0.10%) prior to the announcement of the US GDP (up to 2.5%) and after investors thought about it, the futures plunged to be even with yesterday's closing numbers.

Markets opened -0.15% lower and immediately started a recovery that covered the opening gaps. The large caps climbed to near yesterday's highs while the small caps did a little bit better (+0.40%). Volume is low to moderate with some serious green spikes from the BTFDers which leaves me to wonder if they got the memo. Today is probably going to be the consolidation session we have been looking for. But, then again who knows in this casino market.

Follow up:

As usual there is ALWAYS more to the story and this morning 'glowing' GDP report is no exception and explaining why the markets turned negative at the opening.

Revised Q2 GDP Surges To 2.5% On Trade Boost Even As Consumption And Fixed Investment Deteriorate

On the surface, the just printed revised Q2 GDP number was great: following a preliminary print of 1.7%, the just revised number of 2.5% (beating expectations of 2.2%), up from 1.1% in Q1, should make everyone happy (well not the market which desperately needs bad news to go higher).

However, as usual, the real news is underneath the surface, which is where we find that both real components of GDP growth, Personal Consumption and Fixed Investment were actually revised lower from the preliminary print.

Specifically, Personal Consumption as a contributor of the 2.5% final number was revised from 1.22% to 1.21% (well below the average Personal Consumption number since 2010 of 1.58%), while Fixed Investment was revised from 0.93% to 0.90%. So where did the 0.8% upside come from?

It came entire from net trade, which contributed precisely 0.8%. Imports were revised from detracting 1.51% from GDP to just -1.11%, while exports added not 0.71% as previously expected but 1.11%, thus changing the net trade contribution from -0.80% to 0.00%.

The remaining two components, Inventories and Government Consumption, were a wash, with one adding 0.2% while the other subtracted 0.1% from the preliminary number.

The DOW at 10:15 is at 14863 up 39 or 0.27%.

The SP500 is at 1641 up 6 or 0.37%.

SPY is at 164.44 up 0.55 or 0.34%.

The $RUT is at 1023 up 0.60 or 0.75%.

NASDAQ is at 3620 up 27 or 0.76%.

NASDAQ 100 is at 3097 up 25 or 0.81%.

The longer trend is up, the past months trend is bullish, the past 5 sessions have been negative and the current bias is bullish.

How Oil Really Gets Priced

WTI oil is trading between 108.62 and 109.86 today. The session bias is positive and is currently trading up at 109.40.

Brent Crude is trading between 114.94 and 116.47 today. The session bias is positive and is currently trading down at 116.90.

Gold fell from 1418.18 earlier to 1405.05 and is currently trading down at 1405.80.

Here's why copper has lost its indicator role

Dr. Copper is at 3.264 falling from 3.323 earlier.

The US dollar is trading between 81.41 and 82.05 and is currently trading up at 82.05, the bias is currently bullish.

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

 

Written by Gary

 









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