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Economic Data Sends Market On A Wild Ride

The big earnings announcements have subsided over the last week, but the economic reports continue to flow.  Today, GDP was reported for the second quarter, 2010.  It came in around the estimates at 2.4%.  The futures sold sharply.  Why did the futures sell sharply on a GPD number that came in line with what Wall Street had expected? Because GDP for the first quarter of 2010 was revised upward to 3.7% from 2.7%. What? How does that make sense?  GPD being revised upwards is good news right?  Not so fast.  GDP of 3.7% in the first quarter, compared to GDP of 2.4% in the second quarter means now there is a significant slowdown in progress again.  This leads many to think that double dip recession is in play.

The markets gapped lower with the SPDR S&P 500 ETF (NYSE:SPY) hitting $108.98 within the first few minutes of trading. This was a drop of $1.31 for the day.  The Dow Jones Industrial Average was down more than 100 points.

Then came more economic data.  At 9:45am ET, Chicago PMI was reported to be 62.3.  Analysts had expected a much lower number.  That markets surged higher.  In addition, word came out that BP plc (ADR) (NYSE:BP) would set aside $100 million unemployed rig workers.  That helped fuel a short squeeze.  At 9:55am ET, University of Michigan Sentiment was reported to be 67.8, also higher than economists had expected.  The markets continued to squeeze.

By 11:00am ET, the markets had erased a 100+ point drop on the DOW and were in positive territory.  Truly an amazing move as shorts were caught off guard once again.  In the last hour, the markets had stalled and are now beginning their sideways trek around the flat line.  This is now looking like a typical Friday mid day session with many traders starting to head out for the weekend.  Volume should continue to decline and a flat day is expected on the markets.

Gareth Soloway
Chief Market Strategist