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Fed statements outweigh strong economic data, pushing stocks lower

TradingPub Admin | August 7, 2013

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Statements made by Federal Reserve officials managed to outweigh strong economic data on August 6, as global market participants responded to the information by pushing U.S. stocks lower in value, according to Bloomberg.

Amid these different pieces of news, the S&P 500 Index had a tough session, declining 0.6 percent to finish trading at 1,697.37, MarketWatch reports. The Dow Jones Industrial Average also had a rough day, falling 0.6 percent to close at 15,518.74. The tech-heavy Nasdaq Composite dropped 0.7 percent to reach 3,665.77.

Strong trade data
Government data indicated that in June, the U.S. trade deficit fell more-than-expected, pushing this measure of exports relative to imports to its lowest level since October 2009, the media outlet reports. Foreign entities bought more products from American producers during the month. Also, they purchased a lower amount of oil was shipped into the country.

Global investors were also provided with positive forecasts related to U.S. GDP, according to Bloomberg. Based on the report that indicated the falling trade deficit, both Barclays Plc. and Goldman Sachs Group Inc. economists provided estimates for second quarter GDP growth that were higher than before.

Paul Zemsky, who works in New York as head of asset allocation for ING Investment Management, wrote in an email that concerns about the reduction of QE have been worsened due to the robust economic data, the media outlet reports.

"Certainly some of the move is due to increased concern about tapering due to the very strong trade number," Zemsky told the news source. "It's puzzling to me why better GDP growth would be bad for the equity market, but there are some who view it this way. Longer term, we need to see revenue growth, and stronger GDP will deliver that."

Fed statements
In addition to the strong economic data, the statements of various Fed officials were cited as being a crucial factor that had an impact on the trading of global market participants, MarketWatch reports.

Charles Evans, who is the president of the Chicago branch of the Federal Reserve Bank, told members of the media that the central bank should be able to begin dialing down asset purchases later this year, as the economy will be strong enough at that point, according to the news source.

He predicted that GDP growth will rise to a rate of 2.5 percent for the last six months of 2013, and will then increase to 3 percent for 2014, the media outlet reports. Evans has thus far been a strong supporter of the aggressive policy approach that the Federal Reserve has used to buy significant amounts of bonds, according to Bloomberg.

When speaking with members of the media, he noted that he would like to see more proof that the jobs market has made improvements that will last, even though he said that the labor market has most certainly gotten better, the media outlet reports.

"We will hear more of this type of talk from Fed members as they do their verbal best to soften the market impact of a growing likelihood of a fall taper," Peter Boockvar, chief market analyst at the Lindsey Group, wrote in an email, according to MarketWatch.

Earnings and stocks
Another factor that has had an impact on equities recently is corporate earnings that have surpassed the expectations of market experts, Bloomberg reports. Data compiled by the media outlet indicates that of the more than 80 percent of S&P 500-listed companies that reported earnings so far in the quarter, 73 percent provided figures that were above the estimates of analysts.

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