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This Week in Markets: GDP Revision Up, Jobless Claims Fall, Reddit Slides Further

Published 03/29/2024, 09:14 AM
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  • The final estimate for Q4 GDP growth in the U.S. is revised up to 3.4%, fueled by robust consumer spending and nonresidential fixed investment.
  • A slight decrease in jobless claims to 210,000 further underscores the strength of the U.S. labor market.
  • Reddit's shares continue to slide as the company becomes a target for short-sellers.
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  • This week's major events included an upward revision of US Q4 GDP growth, a larger-than-expected drop in initial jobless claims, a decline in Reddit stock as short sellers targeted it, and a surge in RH shares following a positive outlook.

    Q4 GDP Growth Adjusted Upward

    The US Bureau of Economic Analysis (BEA) reported in its final estimate that the U.S. economy grew at an annualized rate of 3.4% in Q4, higher than the previously estimated 3.2%.

    This revision was mainly due to increased consumer spending and nonresidential fixed investment, partially offset by a reduction in private inventory investment.

    Jobless Claims Dip, Highlighting a Robust Job Market

    The number of initial state unemployment claims decreased by 2,000, reaching a seasonally adjusted figure of 210,000 for the week ending March 23, which was below the economists' forecast of 212,000.

    This continued trend of low unemployment benefit applications indicates a strong economic environment.

    Reddit Shares Drop Further Amid Short-Sellers' Interest

    Reddit's (NYSE:RDDT) stock is falling for the second consecutive day as short-sellers reportedly set their sights on the company. Following its impressive debut last week, which saw a notable surge in its share price, the social media company attracted significant short-selling activity in its initial days on the market.

    After hitting a high of $74.90 on Tuesday, Reddit's share price fell by approximately 11% on Wednesday and an additional 14% on Thursday. Reuters reported on Wednesday that preliminary estimates from Ortex suggest that at least 7.1% of Reddit's freely traded shares have been shorted, based on 2.15 million shares out on loan.

    The decline in Reddit's stock on Wednesday was primarily triggered by a report from Hedgeye Risk Management, which added the stock as a short idea, predicting a potential 50% decrease in its price.

    RH Jumps on Optimistic Outlook

    RH (NYSE:RH), a retailer specializing in luxury home furnishings, saw its shares surge by over 17% on Thursday despite reporting Q4 results that fell short of Wall Street expectations for EPS and revenue, impacted by adverse weather and shipping delays.

    However, the company expressed optimism, anticipating demand trends to pick up throughout fiscal 2024. For the coming year, RH predicts a demand increase of 12% to 14% and revenue growth between 8% and 10%.

    In Q4, RH reported earnings of $0.72 on revenue of $738 million, missing analyst estimates of $1.69 and $778M, respectively.

    new year

    Markets are closed today for the Good Friday holiday in the US, but key data will still be released, including the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE), which is anticipated to influence the outlook for U.S. interest rates.

    Additionally, speeches from Fed Chair Jerome Powell and FOMC member Mary Daly are scheduled for today.

    ***

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    Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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