No Taper Tantrum From Investors

Despite Friday’s better-than-expected economic data, investors failed to push the major stock indices into the red due to fear of a “Dectaper”.  

There were widespread expectations that upbeat economic news on Friday would keep investors in a selling mood. Thursday’s 0.43 percent declines for both the Dow and the S&P 500 were seen to signal investors’ fears that the FOMC would vote to taper the Federal Reserve’s bond-buying on December 18. Thursday’s stock market decline followed a report from the Bureau of Economic Analysis on its second estimate of third quarter GDP, which jumped to a 3.6 percent rate of annual expansion from the initial estimate of 2.8 percent growth.
 
Friday brought a better-than-expected November non-farm payrolls report from the Bureau of Labor Statistics. Economists were expecting to see 180,000 non-farm payroll jobs added in November, with a decline in the unemployment rate to 7.2 percent from October’s 7.3 percent. To everyone’s surprise, the BLS reported that 203,000 new non-farm payroll jobs were added and the unemployment rate declined to 7.0 percent.
 
Another upside surprise came in the form of the preliminary Thompson Reuters/University of Michigan Consumer Sentiment Index for December. Although economists were expecting to see an increase to 75.5 from November’s 75.1, the index skyrocketed to 82.5.
 
Most stock market commentators had expressed the view that positive reports would motivate investors to have another “taper tantrum” and sell-off stocks out of anger that the Fed might no longer be around to prop-up stock prices. Fortunately, that did not happen.
 
The Dow Jones Industrial Average (DIA) picked up 198 points to finish Friday’s trading session at 16,020 for a 1.26 percent advance. The S&P 500 (SPY) jumped 1.12 percent to close at 1,805.
 
The Nasdaq 100 (QQQ) climbed 0.76 percent to finish at 3,504 – its highest close since September 29 of 2000. The Russell 2000 (IWM) surged 0.79 percent to end the day at 1,131.
 
In other major markets, oil (USO) advanced 0.34 percent to close at $35.05.
 
On London’s ICE Futures Europe Exchange, January futures for Brent crude oil advanced $0.77 (0.70 percent) to $111.34/bbl. (BNO).
 
February gold futures declined $2.10 (0.17 percent) to $1,230.00 per ounce (GLD).
 
Transports were back in the express lane on Friday, with the Dow Jones Transportation Average (IYT) accelerating 0.63 percent.
 
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks broke a two-day losing streak, as the yen weakened to 102.17 per dollar before Friday’s closing bell in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average surged 0.81 percent to 15,299 (EWJ).
 
Stocks retreated China as dense smog made it impossible to see anything. The situation caused coal stocks to sink, dragging the market lower. The Shanghai Composite Index declined 0.44 percent to 2,237 (FXI). Hong Kong’s Hang Seng Index advanced 0.13 percent to end the day at 23,743 (EWH).
 
Okay – this time it really happened. Friday’s European stock market activity actually was driven by news from America. By 8:15 EST, the Euro STOXX 50 Index had fallen into the red after a report from Destatis indicated that German factory orders declined 2.2 percent in October, for the most significant decline since November of 2012. After the release of the November non-farm payrolls report from our Bureau of Labor Statistics at 8:30, the STOXX 50 quickly jumped from the day’s low of 2,940 to the day’s high of 2,985 by 9:15 EST.

The Euro STOXX 50 Index finished Friday’s session with a 0.91 percent jump to 2,979 – while failing to reach its 50-day moving average of 3,016. Its Relative Strength Index is 40.22 (FEZ).
 
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,751 after jumping 1.12 percent to finish Friday’s session at 1,805. Its Relative Strength Index climbed from 52.87 to 61.56. Although the MACD remains below the signal line, it is on a level trajectory, which would suggest that the S&P will continue to hold near 1,805 during the immediate future.
 
On Friday, the consumer staples sector missed the boat with a 1.36 percent gain, while the materials, utilities, financial, and healthcare sectors all advanced by 1.37 percent. The industrial sector led the group, jumping 1.53 percent.
 
Consumer Discretionary (XLY):  +0.84%
 
Technology:  (XLK):  +0.69%
 
Industrials (XLI):  +1.53%
 
Materials: (XLB):  +1.37%
 
Energy (XLE):  +0.31%
 
Financials: (XLF):  +1.37%
 
Utilities (XLU):  +1.37%
 
Health Care: (XLV):  +1.37%
 
Consumer Staples (XLP):  +1.36%
 
Bottom line:  Investors managed to avoid having a “taper tantrum” on Friday, despite the better-than-expected November non-farm payrolls report and the shockingly-upbeat, preliminary reading of the December Consumer Sentiment Index.
 
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