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Economic Update 02/02/15

FOURTH QUARTER SAW 2.6% GROWTH

Given the final 5.0% GDP reading for Q3, this initial Commerce Department estimate displeased many investors – even though the personal spending rate rose an impressive 4.3% in Q4. Investors also disliked the 3.4% overall dip in hard goods orders for December, which followed a 2.1% descent in November.

HOUSEHOLDS IN AN UPBEAT MOOD

At 102.9, January’s Conference Board consumer confidence index shattered the 96.9 forecast of analysts polled by MarketWatch. The University of Michigan’s January consumer sentiment index reached 98.1, its best final monthly reading in 11 years.

NEW HOME SALES ACCELERATE

They advanced 11.6% in December, with the Census Bureau noting an 8.8% yearly rise in the sales pace. On the other hand, the National Association of Realtors found pending home sales down 3.7% in December. November’s S&P/Case-Shiller home price index showed an overall 4.3% yearly gain, 0.2% less than the October edition.

A ROUGH MONTH ENDS ON WALL STREET

While the January 28 Federal Reserve policy statement bullishly referenced an economy growing at “a solid pace,” disappointment over key earnings reports and the Q4 GDP number sent stocks further south. Losing another 2.77% across five trading days, the S&P 500 concluded January at 1,994.99. The Dow and Nasdaq also gave up ground last week – the Dow lost 2.87% to close at 17,164.95 Friday, while the Nasdaq retreated 2.58% in five days to slip to 4,635.24.

THIS WEEK: Monday brings December personal spending numbers, ISM’s latest factory activity index, new factory PMIs for the eurozone and China and earnings from ExxonMobil, Sysco, Hartford Financial and Pitney Bowes. Tuesday offers data on December factory orders and January auto sales plus earnings from Chipotle, UPS, Archer Daniels Midland, Walt Disney, BP, Aetna and Gannett. ISM’s January services index and ADP’s employment change report are out Wednesday, along with earnings from Clorox, Marathon Petroleum, Whirlpool, Sony, Yum! Brands, General Motors, Merck, Humana, Keurig Green Mountain, Ralph Lauren, Under Armour, Allstate and Suncor Energy. Thursday brings January’s Challenger job-cut report, new initial claims figures and earnings from Twitter, Lions Gate Entertainment, Buffalo Wild Wings, Pandora, Sprint, Activision Blizzard, GoPro, Philip Morris, Symantec, AstraZeneca, Sirius XM, Michael Kors, Teva Pharmaceutical, Yelp, Dunkin Brands, LinkedIn and Expedia. Friday sees the release of the Labor Department’s January jobs report plus earnings from Alcatel-Lucent and Moody’s.

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