We missed an interesting session yesterday with our quarterly survey so it is worth mentioning it today. The market was very volatile yesterday but sometimes that can cause a shakeout of sorts when it comes at the end of a correction. Also the NASDAQ hit a key moving average - the 200 day - which if nothing else is usually a place for momentum to reverse in the near term. Was that the end of the correction? Of course we never know until after the fact but creating a new low and then surging off it can sometimes signal a key reversal. As for today, the Federal Reserve continues to try to massage the market's nerves and Janet Yellen helped lift spirits, pushing the S&P500 up 1.05% and the NASDAQ 1.29%.
Stocks continued a very volatile week, as we saw another bounce today off short term oversold levels. The S&P 500 added 1.13% and the NASDAQ 1.77%. Facebook's large gain, which we discussed yesterday, helped lift many boats in the tech sector - Twitter and LinkedIn both had very large gains. January will be a down month and some believe a bad start to the year bodes ill for the entire year but some analysis today noted: "In 12 of the 21 Januarys since 1960 in which stocks traded lower have seen the subsequent 11 months trade higher including four of the last five instances."
Yesterday we noted that while there were a decent amount of three day selloffs in 2013, the four day selloff was rare indeed, so it would be interesting to see if the bulls showed up today. Indeed they did, with futures up sharply and the market never looking back after gapping up at the open. The S&P 500 gained 0.61% while tech stocks led the NASDAQ higher, to a gain of 0.96%. Keep in mind tomorrow afternoon we get the release of the Fed minutes from the meeting where they cut quantitative easing. The key economic report of the day was the trade deficit which fell to the smallest level in 4 years as energy exports have created a mini boom in the U.S.
Good news was good news Friday, a welcome change. Gross domestic product grew at an annual rate of 4.1 percent in the third quarter, the fastest pace in almost two years, and exceeding the 3.6 percent pace reported earlier this month. Business spending was also stronger than previously estimated. The S&P 500 gained 0.48% and the NASDAQ 1.15%. As we stated in yesterday's recap, the way the indexes held almost all of Wednesday's large gains was a positive sign for the bulls, and today we had a clear breakout in the major indexes.
It was another quiet session and sort of the exact opposite of yesterday; today the market gapped down and stayed in a narrow range - whereas yesterday the market gapped up and stayed in a narrow range. The S&P 500 fell 0.32% and the NASDAQ 0.20%. Most of the action was in very specific niches of the market, such as social media. News flow remains quiet. Next Tuesday and Wednesday the Fed has its last meeting of the year and some media types are saying they might taper but one would doubt Bernanke would do this at the end of his reign and just ahead of the holidays.