Courtesy of John Nyaradi.
Stocks faded today on concerns over the Federal Reserve, the Congressional super committee failure, the possibility of another U.S. debt downgrade and weakening GDP.
Stocks declined slightly in relatively thin holiday trading on mostly negative news with the Dow Jones Industrials (NYSEARCA:DIA) losing 0.5%, the S&P 500 (NYSEARCA:SPY) declining -0.4% and the financial sector (NYSEARCA:XLF) dropping -0.9%. Among widely held “risk assets,” the only star performer was the oil sector (NYSEARCA:USO) which gained +0.6%.
Markets are still digesting the failure of the Congressional super committee and analysts reports indicating that this failure could lead to further downgrades of the U.S. credit rating as early as December. This, of course, wouldn’t be good news for the U.S. or global economy, and further bad news on the economic front came with the Federal Reserve’s downward revision 3Qtr GDP to 2.0%, indicating that the economy grew slower than previously estimated.
The Federal Reserve also disclosed that it would be conducting new stress tests on large U.S. banks with more than $50 billion in assets which includes as many as 31 large U.S. banks and their holding companies including Citigroup, Bank of America, JP Morgan, Chase, Goldman Sachs and Morgan Stanley which could add further pressure on the financial sector (NYSEARCA:XLF) in the event that some of these institutions could be required to raise capital and/or reduce dividends payments depending upon the outcome of these tests that is scheduled to be released early next year.
Tomorrow brings a slew of economic reports including jobless claims, durable goods orders, personal income and spending, consumer sentiment and another Fed survey, this one from Kansas City which will round out the week’s reports before Turkey Day.
Bottom line for ETF investors is that the environment remains volatile and dangerous and Santa is facing significant headwinds if he intends to get the “Santa Rally” underway as we move through the Thanksgiving weekend and into December.
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