Share prices advanced on Wall Street Tuesday, boosted by a surprise upward revision to third-quarter GDP.
By Peter Martin
Wednesday, November 26, 2014
The advance in the stock market saw the S&P 500 set another intraday all-time high of 2074.21. By mid-afternoon in New York the blue-chip index was just a few points back from that level, up 0.04% at 2070.2, while the Dow Jones gained 0.14% or 25 points to 17,843.
The Bureau of Economic Analysis had previously made a first estimate for third-quarter GDP of an annualized 3.5% and expectations had pointed to that being trimmed in the second estimate, but the new estimate, based on more complete source data than was available for the advance estimate, came in at 3.9%, with private inventory investment declining a smaller amount than previously reckoned and personal consumption expenditures and non-residential fixed investment higher than estimated before. The GDP price index was revised up to 1.4% from 1.3% in the advanced estimate.
Consumer confidence declines
This unexpectedly good result for GDP helped to offset disappointment in the Conference Board’s Consumer Confidence Index for November, which sunk to 88.7 from October’s downwardly-revised level of 94.1 (originally reported as 94.5). The headline index is composed of two sub-indices, the present situation index and the expectations index. Both declined, with the expectations component suffering the steeper decline of the two, with consumers much less optimistic about the outlook for business conditions and with concerns over the future state of the labor market. This is quite a worrying result heading into Black Friday and the Holiday shopping season beyond, but with October’s level setting a seven-year high, November was always facing a tough comparison.
Housing data released today points to some softening in house price appreciation. The Federal Housing Finance Agency (FHFA) house price index was unchanged in September, after a 0.4% gain in August, taking September’s year-on-year change to 4.3%, compared to 4.7% in August. The Case-Shiller 20-city home price index grew a seasonally-adjusted 0.3% in September, in line with estimates. The non-adjusted annual change was 4.9%, slowing from the 5.6% seen in August, and the lowest pace of annual growth in almost two years. More housing data is released tomorrow, when we have new homes sales and pending home sales.
Dollar weakens against euro, yen
Despite the upward revision to GDP, the US dollar has not had a great day on the whole. The euro gained 0.25% against the dollar to 1.2472, adding to yesterday’s bounce, as forex traders further rationalized yesterday’s comments from Bundesbank President Jens Weidmann. The euro suffered steep selling last week sparked by ECB President Mario Draghi suggesting additional stimulus measures were around the corner, but Mr Weidmann raised doubts about this by pointing out the legal hurdles the central bank might face if it attempts to buy sovereign debt.
USD/JPY sank 0.29% to 117.94, after minutes released from the last Bank of Japan meeting show the decision to introduce further easing last month was extremely tight. Opposition came from four of the nine board members of the central bank, and this suggests Governor Haruhiko Kuroda will not find it easy should he wish to pursue further measures, despite his pledge that the Bank of Japan ‘will continue to take action.’
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