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Lots of Data & Tax Selling

12/15/2011

The S&P 500® Index has come under significant selling pressure this week (Fig 1.1). Aggressive selling in high-beta sectors like energy, materials, and industrials has positioned the Index to challenge a critical support day, November 30. That day stands out as it reversed much of the late November negative momentum and returned the S&P 500 to the upper end of this fall’s range (Fig 1.2). Maintaining above the November 30 low of 1196.72 is critical, and worth investor’s attention (Fig 1.3).
 
Volumes continue to suggest a holiday mindset while the trading desk chatter suggests an emphasis on end-of-year tax selling. With tremendous uncertainty regarding future domestic tax structures, I suspect much of this week’s selling is being driven by the “book it now” mentality.
 
Today’s U.S. data should be encouraging for all investors currently scripting their 2012 strategy. Recent labor condition improvements are gaining momentum and manufacturing data is recovering nicely from the late August swoon. A recovery in manufacturing will be supportive for continued robust enterprise and consumer spending.
 
Let’s take a look at today’s data. . . .
 
Initial Jobless Claims
•  Claims fell 19,000 to 366,000 – the lowest level since May 2008
•  The four-week moving average now stands at 387,750 – the lowest level since July 2008
•  Continuing claims did tick higher, from 3,599,000 to 3,603,000; however, consensus estimates expected an uptick in the range of 3.62 to 3.64
 
Philadelphia Fed Survey
•  December’s Philly Fed reported at +10.3, up from last month’s +3.6, and ahead of +5.0 survey
 
Empire Manufacturing Survey
•  December’s Empire Manufacturing reported at +9.53, up from last month’s +0.61, and ahead of +3.00 survey

 
Fig 1.1 SP 500 Index last 5 trading days

Source:  Bloomberg


Fig 1.2 SP 500 Index Fall 2011

Source:  Bloomberg


Fig 1.3 SP 500 Index with November 30 support highlighted

Source:  Bloomberg


Fig 1.4 Initial Jobless Claims January 2008 to December 2011

Source:  Bloomberg


Fig 1.5 Initial Jobless Claims Four Week Moving Average July 2008 to December 2011

Source:  Bloomberg


Fig 1.6 Philly Fed Year to Date

Source:  Bloomberg


Fig 1.7 Empire Manufacturing Year to Date

Source:  Bloomberg

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