There has been a modest shift in momentum of Wall Street as stock prices have dropped for three sessions in a row. Granted, the losses have been minimal with the Dow industrials down a mere 1.1 percent during the decline. But it is enough for many of the permabears to say, "See, I told you so." The problem seems to be a growing fear that the Fed will make a major announcement at the open market committee meeting next week and at least indicate the end of easing is at hand, stimulus will be removed and interest rates will be heading higher.
Of course, it would be quite a surprise if the Fed did make such an announcement with the change of leadership -- Ben Bernanke to retire, Janet Yellen to take over -- being less than two months away. Of course, Bernanke is the mastermind behind quantitative easing, so maybe he wants to plant the seed for tapering before he heads out on a speaker's tour and makes big bucks.
There has been a modest shift in momentum of Wall Street as stock prices have dropped for three sessions in a row. Granted, the losses have been minimal with the Dow industrials down a mere 1.1 percent during the decline. But it is enough for many of the permabears to say, "See, I told you so."
One guy who says the Fed should be cautious before announcing any tapering is John Williams, the president of the Federal Reserve Bank of San Francisco. In an interview yesterday, he suggested that the Fed better be pretty darned sure -- what he really said was "completely confident" -- before cutting off the economic stimulus. That opinion seems very much in line with the opinion of Janet Yellen.
The ADP employment report for November caught people by surprise this morning. The survey of civilian payrolls saw an increase of 215,000, the biggest monthly increase in more than a year. Most of the job growth came from small- and medium-size businesses where hiring grew by a combined 150,000 jobs. "The job market remained surprisingly resilient to the government shutdown and brinksmanship over the treasury debt limit," said economist Mark Zandi, which shows the "blame it on the government shutdown" excuse is starting to run out of steam.
Before you get too excited about the job market, another report shows payroll growth isn't quite so robust. TrimTabs says its research shows the economy only added 115,000 jobs in November, causing CEO David Santschi to say, "The American jobs machine is stuck in low gear despite billions of dollars per day in fiscal and monetary stimulus."
We'll find out Friday whether ADP or TrimTabs is right about the job market when the Department of Labor releases the official November report on payrolls and the nation's unemployment rate before trading opens on Wall Street.
Speaking of blaming every bad economic report on the government shutdown, there is universal surprise in the news from the Department of Commerce this morning that shows new home sales in October were up by more than 25 percent to an annualized rate of 444,000 units, the highest level in four months. MarketWatch.com said, "Americans looking to buy newly built homes evidently brushed off concerns about the government shutdown in October." Either that or they never even heard about it or cared. The big boost in sales cut the supply of new homes down to 4.9 months from 6.4 months in September.
Here's a report countering the claims the holiday shopping season is not going well. Visa, the credit card processing company, said credit card spending rose by 30 percent between Thanksgiving Day and Cyber Monday, up to $7.8 billion. And, UPS says it handled 32 million packages on Monday alone. All that online shopping means more and more packages have to be delivered.