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Market Weakens Further on Taper Fears

Thu, Dec 12, 2013 - 2:58pm

The S&P 500 declined 0.38% and the Dow was lower by 0.66%. Investors are getting jittery that the Fed may finally begin to taper QE at their meeting next week. There are concerns that there will either be a formal announcement or a strong signal from Chairman Bernanke that the tapering process will begin soon.

Retail sales numbers came in better than expected and caused a major brokerage firm to increase their fourth quarter GDP estimate. That news was more than offset by investor fears concerning the beginning of the tapering process. Banks, energy, and utilities outperformed today while staples and media lagged.

Retail sales were solid in November and revised figures indicate that October reported numbers understated the actual sales figures. Real consumer spending is on track for an annualized rate of around 3.5% this quarter. The last reported figure was 3.0%. Inventory levels have also been worked down after the sharp spike in levels in the third quarter.

Financials were flat on the day and investors aggressively came in and bought dips in the sector today. The bank index ended the day 0.50% higher.

Industrials traded slightly ahead of the tape. There are going to be several companies in the sector talking about fiscal 2014 outlooks next week. Danaher traded higher today after they reaffirmed earnings for this year and gave strong guidance for next year.

Homebuilders traded ahead of the tape after Hovnanian Enterprises reporting positive surprises in both revenues and earnings.

Transports traded ahead of the tape. Southwest Airlines gained 4.5% on analyst upgrades. Several airlines raised fares this week.

Energy traded slightly higher while crude was flat and natural gas rose by 0.50%. Refiners saw some strength on the news that the ethanol mandate could be eliminated in the Senate.

Media was lower as some said potential buyout activity in the space is just speculation at this time. Rumors of Discovery buying Scripps Networks cooled today.

Social/mobile stocks were strong today. Facebook rallied after the announcement that it is going to be added to the S&P 500. Yahoo was strong in the advertising space.

Consumer staples lagged today as talk of the taper gained steam. The beginning of the tapering process would increase interest rates and make bond yields more competitive with dividend yields.

Source: PFS Group

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