Stocks Hit New Record Highs After GDP Report

Stocks soared higher on quadruple-witching day after the third estimate of third-quarter GDP was revised upward from 3.6 percent to 4.1 percent.
 
Friday’s third estimate of third-quarter GDP from the Bureau of Economic Analysis sent the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 to new record highs. Stocks got a big boost after the third estimate of third quarter GDP was upwardly-revised from 3.6 percent to 4.1 percent. The fact that the news arrived on “quadruple witching day” – when contracts expire for stock index options, stock index futures, individual stock futures, and individual stock options – helped amplify the stock market surge.
 
The report validated a claim made by outgoing Fed Chair Ben Bernanke at Wednesday’s press conference, in response to a question from Binyamin Appelbaum, when the Chairman said:
 
Compared with other advanced industrial countries, the U.S. is doing better than most in terms of economic recovery.
 
The Dow Jones Industrial Average (DIA) picked up 42 points to finish Friday’s trading session at a new, record-high close of 16,221.14 for a 0.26 percent advance, after hitting a record intraday high of 16,287.84. The S&P 500 (SPY) climbed 0.48 percent to finish at a new, record-high closing level of 1,818.32, after hitting a record intraday high of 1,823.75.
 
The Nasdaq 100 (QQQ) jumped 0.93 percent to finish at 3,531. The Russell 2000 (IWM) skyrocketed 1.87 percent to end the day with a record-high close at 1,146.47 after hitting a new record intraday high of 1,147.12.
 
In other major markets, oil (USO) advanced 0.45 percent to close at $35.48.
 
On London’s ICE Futures Europe Exchange, February futures for Brent crude oil advanced $1.55 (1.41 percent) to $111.54/bbl. (BNO).
 
February gold futures advanced $9.20 (0.77 percent) to $1,202.80 per ounce (GLD).
 
Transports climbed to within spitting distance of the Moon on Friday, as the Dow Jones Transportation Average (IYT) skyrocketed 1.02 percent.
 
In Japan, anxiety that the nation’s central bank could change its monetary policy to strengthen the yen kept stocks in the red until the final minutes of the session. The Bank of Japan decided to continue expanding its monetary base by 60-70 trillion yen per year. Although that may sound like quite a bit of money, keep in mind that the yen is worth less than a penny. Japanese stocks advanced as the yen weakened to 104.55 per dollar just 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 advanced 0.07 percent to 15,870 (EWJ).
 
Stocks extended their losing streak in mainland China to an ninth day as Thursday’s move by the People’s Bank of China to inject cash into the system by way of short-term liquidity operations, proved to be too little, too late. The seven-day repo rate climbed to 7.75 percent from Thursday’s close at 7.06 percent. The Shanghai Composite Index took a 2.02 percent nosedive to 2,084 (FXI). Hong Kong’s Hang Seng Index declined 0.33 percent to end the day at 22,812 (EWH).
 
In Europe, quadruple witching day – when contracts expire for stock index options, stock index futures, individual stock futures, and individual stock options – combined with an upbeat report on German consumer confidence to send stocks higher. GfK issued a forecast that its Consumer Climate Indicator for Germany would rise to 7.6 in January from December’s 7.4.
 
The Euro STOXX 50 Index finished Friday’s session with a 0.60 percent advance to 3,049 – climbing further above its 50-day moving average of 3,026. Its Relative Strength Index is 57.13 (FEZ).
 
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,774 after advancing 0.48 percent to finish Friday’s session at a new, record-high closing level of 1,818.32. Its Relative Strength Index rose from 59.95 to 62.83. The MACD just crossed above the signal line, which would suggest that the S&P should continue to advance during the immediate future.
 
 
On Friday, five sectors advanced and four sectors declined. The materials sector took the hardest hit, falling 0.39 percent.
 
Consumer Discretionary (XLY):  +0.02%
 
Technology:  (XLK):  +0.29%
 
Industrials (XLI):  +0.29%
 
Materials: (XLB):  -0.31%
 
Energy (XLE):  -0.29%
 
Financials: (XLF):  +0.12%
 
Utilities (XLU):  -0.08%
 
Health Care: (XLV):  +0.09%
 
Consumer Staples (XLP):  -0.03%
 
Bottom line:  A shockingly-high third estimate of third quarter GDP – indicating that the economy expanded at an annual rate of 4.1 percent – sent the Dow, the S&P 500 and the Russell 2000 to new record intraday and closing highs.

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