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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • STOCKS TAKE A BREATHER - By WSS Research Desk 0 comments
    Mar 27, 2014 2:00 PM

    By Carlos Guillen

    After dropping close to 99 points yesterday, the Dow Jones Industrial Average appears to be taking a breather during today's trading session as it stands rather flat, and mixed economic data points were no help either.

    Quite encouraging today was that the number of people filing for unemployment benefits for the first time made a strong improvement after heading in the wrong direction in the prior week. According to the Department of Labor, initial claims during the week ended March 22 totaled 311,000, decreasing from the 321,000 revised figure reported for the prior week and landing below the Street's estimate of 330,000. The result continued below the 350,000 level which economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month, so at least the hope for an improving jobs market still remains alive. The initial claims' four-week moving average was 317,750, decreasing from the prior week's average of 327,250, so the direction here is very encouraging as this was the fifth week of declines; however, cautious optimism is still at play.

    Also fairly encouraging today was that U.S. output improved better than the prior estimate. According to the Bureau of Economic Analysis, real gross domestic product (GDP) during the fourth quarter of 2013 increased quarter-over-quarter by 2.6 percent (annualized), in line with the Street's consensus estimate, but higher than the second estimate of 2.4 percent presented a month ago, which was mostly attributed to higher health-care spending. The result, however, still represented slowing growth from that reached in the third quarter of last year.

    On the inflation side, prices for GDP increased by 1.6 percent (annualized), in line with Street estimates. The still rather low rise in prices may also serve to motivate the Fed to slow tapering when the FOMC meets the next time around, which can serve to lift stocks in the short term.

    On the negative side of economic data points was data from the National Association of Realtors, which showed a slumping for a ninth month. A gauge of pending home sales fell 0.8 percent in February to the lowest level in more than two years, lower than the 0.2 percent decline the Street expected, signaling that upcoming activity may slow: more on this below.

    Pending Home Sales
    By David Urani

    The February Pending Home Sales Index (a forward-looking measure of incomplete sales) from the NAR came in with another decline, falling by 0.8% month to month seasonally adjusted to a reading of 93.9. The consensus had called for a comparable decline so it wasn't a big surprise. However, this marks the ninth decrease in a row for the index, an alarming downtrend that doesn't bode well for sales in the coming months. New and existing home sales had also shown modest declines for February, although these readings are all seasonally adjusted. On a non-adjusted basis keep in mind that sales were up 9.4%, as sales typically start to pick up in February. However, the index is also running 10.5% below year ago levels. Overall it's not an encouraging report, although one may still hold out for some hope that the tough weather held back traffic as we wait for the spring thaw to bring out more buyers.

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