Wednesday, December 4, 2013 Zeb’s VUE

General Information and Analysis

US

The stock market was down yesterday, which everyone knows.  It is down this morning as well.  There was a late bid in the DOW and S&P 500 that pared the losses (unlike the previous 2 sessions). 

It looks like the USA stock market will open lower.  The sell off overnight was due to European markets when came under renewed selling pressure after loosing 1-3% yesterday.  Services PMI for the Eurozone was mixed, and the retail sales reports are weak.

China announced it will create up to 18 new free-trade zones.  That created a stir, and the Shanghai Index jumped 1.3%.

Angst over tapering in the USA is increasing, and the angst is what is being blamed for the USA declines (more that weak economic data).  Take the ADP employment Change for November.  The change was much stronger (for the economy) than expected.  It shows private sector payrolls increased by 215,000 jobs in November after upwardly revised number of 184,000 in October. 

Readers, the jobs being added are in retail – which usually comes about in time for the Christmas season.   Investors and traders, however, seem on the whole to believe that the Federal Reserve does not look at or care about middle-class jobs – only unemployment.  Now one can observe that as soon as the ADP number was released, traders drove the stock market down, very likely because of the belief the number will allow the Federal Reserve to taper sooner rather than later.  

Coming up this morning is a barrage of economic news.  New Home Sales, ISM Services, and the Fed’s Beige Book will provide additional insight into Q4 GDP. 

Interest rates on 10 year Treasury notes is rising, now standing at 2.84%.  That will also provide headwind for the USA stock market as tapering will raise interest rates at the back end of the Treasury curve (which the Federal Reserve cannot control – directly). 

Overall, day traders can expect another day where pressures drive prices lower.  Once the TBTF (too big to fail) banks decide enough is enough, they could enter the market late in the day and drive prices way higher off the lows.  That has been a very consistent pattern through-out 2013.