US stocks are entering holiday mode as concerns over a virus variant temper a humble rebound that stemmed from the approval of a fiscal relief bill. Wall Street ignored a wrath of economic data that showed the strongest parts of the economy, housing and the consumer are wavering. The playbook for many traders remains to buy every major dip as governments and central banks will keep the support coming next year.
US GDP revised upwards
The third look at US GDP saw a slight bump to 33.4%, while personal consumption was revised higher to 41.0%. The record rise in GDP had no impact on markets as everyone remains focused on how strong the fourth quarter will be. As the country tries to get COVID under control, restrictive measures will continue to weigh down on fourth-quarter forecasts. The Atlanta Fed GDP Now index at the end of last week was calling for 11.1% growth, while the consensus estimate is closer to a 2% contraction.
The 10:00 am swath of data provided a gloomier picture but did little make anyone believe these short-term worries will mostly last a few months. The Conference Board’s present situation plunged but hope remains over the short-term. The monthly consumer confidence survey showed current conditions deteriorated sharply as the third wave of COVID-19 pressures the labor market. An upbeat short-term outlook should confirm Wall Street’s playbook to buy every dip.
Existing home sales are slowing down but still exemplifying the strength of the housing sector. The first drop in six months, sales of previously owned homes dropped 2.5% to 6.69 million, slightly steeper than expected. The hot housing market appears poised to steady on low inventories, inflated prices, colder weather, and vaccine breakthroughs.
The December Richmond manufacturing survey was a bright surprise as the headline came in better-than-expected at 19, with strong gains with new order volumes.
US dollar shows gains
The dollar is posting a rare back-to-back gain as growing COVID-19 concerns trigger steady safe-haven flows. The mutation of the coronavirus will deliver a period of great uncertainty over the next two weeks to see if the current vaccines will be effective. Optimism is high that the vaccines will still prove to be effective and can be tweaked in the future. The short-term pain for the global economy could allow the dollar to rebound a bit more.