A very strange market
But aside from all this the Greenback liked the Fed statement, and of course with the EUR/USD backing off again it was favorable for equities overall. We have a very strange market. The NDX is right near the top in July as names like Amazon (AMZN) and Microsoft (MSFT) made new highs. But the SOX backed off. At first there was a rotation into biotech but on Thursday even that backed off.
On the other side of the spectrum we have housing stocks like PHM which is struggling not to make fresh lows while KBH actually broke important support to make a new low on Thursday. So why is it tech should be near new highs while housing is going in the opposite direction?
It might have something to do with the bond market. While we know the Fed has a handle on short-term rates they hardly control the long end of the curve where prices dropped roughly 1.64% on Thursday so there is fear that rates will start to hike. In an economy as weak as this there is no margin for error. To give you an idea of just how weak the economy really is 3rd quarter GDP came in at 1.5%. But here’s the concern with an assist from John Crudele from Friday’s New York Post. He writes in "The Commerce Dept.’s GDP Numbers Don’t Make Any Sense."
That number won’t allow the United States to create enough jobs for the number of people entering the work force. It’s less than half the number for the 2nd quarter GDP if you believe that was right. But get this, of the 1.5%, .45 of a percentage point came from increased health care spending. Putting it another way, forced mandatory Obamacare payments caused nearly one-third of the growth in this country. Isn’t that pathetic? And you wonder why I tell you we live in a time where the crowd sticks its head in the sand when it comes to dealing with reality.
But it gets better. According to Crudele, increases in durable good spending were .48%. That spending is for cars, appliances, planes and things of that nature. Without it GDP would be 1.02%. Here’s the problem. Sales of durable goods have been in free fall. The Census Bureau reported earlier in the week that durable goods for September fell 1.2% after a 3% decline in August. However in July durable goods rose 2%. So Mr. Crudele makes the point of how do we get an increase of .48% after an increase of 2, decrease of 3 and decrease of 1.2? Mr. Crudele sent an inquiry to the Commerce Department. He’s still waiting.