MONDAY-WEDNESDAY’S ACTION: Stocks Soar After Fed Meeting
Stocks rallied on Monday as investors waited for the Fed’s last meeting of the year. Manufacturing activity in the the NY area rose but missed estimates while a separate report showed productivity in the US rose 3% in the third quarter. Stocks fell on Tuesday as the FOMC started their last meeting of the year. Economic data was mixed. The consumer price index remained soft which helped allay any inflation woes. Meanwhile, home builder confidence jumped to 58, beating the Street’s estimate for 55.
THURSDAY & FRIDAY’S ACTION: STOCKS DEFEND SUPPORT
Stocks were quiet on Thursday as investors digested Wednesday’s big rally. Social media giant, Facebook (FB) slid after Mark Zuckerberg said he would sell 41.4 million shares worth about $2.3 billion as part of an offering of 70 million shares as the stock traded near fresh record highs. Separately, shares of Target (TGT) slid after the retail powerhouse said about 40 million credit and debit card accounts used by its customers may have been compromised by a security breach. Economic reports were mixed. Existing-home sales slid by -4.3% in November, missing estimates and was the lowest reading since December 2012. The Conference Board said economic activity rose in November while the Philly Fed Index beat estimates and rose to 10. On a more concerning note, weekly jobless claims missed estimates for the second straight week and jumped to 379k. Before Friday’s open, the government revised GDP up to 4.1%, much stronger than the prior estimate of 3.6% and the second quarter’s reading of 2.5%. Stocks rallied on the news as this reaffirmed the Fed’s decision to taper and suggests that the Fed may be able to exit QE gracefully if the healthy action continues.
MARKET OUTLOOK: Bulls Are In Control
As we have been saying all year, the market is strong in all three time-frames: short, intermediate, and long. The last pullback was shallow in size (%decline) and scope (days/weeks, not months). For weeks, we have been saying, the market will pullback and it is just a matter of when, not if. That is exactly what happened. As always, keep your losses small and never argue with the tape.