Stocks drifted higher on light volume on Tuesday as we close in on the long weekend and the Christmas holiday.
After an ugly close on Friday stocks have now recouped most of those losses, though investors are still looking for a “Santa Claus” rally to materialise.
First, the scoreboard:
- Dow: 17,416, +165, (+0.9%)
- S&P 500: 2,039, +18, (+0.8%)
- Nasdaq: 4,999, +30, (+0.6%)
And now, the top stories on Tuesday:
- The final estimate of third quarter GDP beat expectations as we learned the US economy grew at a fine, but not spectacular pace, during the period spanning July 1 to September 30. The economy grew at a 2% pace during the third quarter while personal consumption rose at a 3% pace, affirming the strength of the US consumer. In a note to clients following the report, Michael Gapen at Barclays wrote, ” Altogether, the third estimate of Q3 GDP does little to change the picture of solid domestic activity offset by weakness abroad.”
- Also on the economic data front we got mixed housing data, with the FHFA’s home price index for October — quite a lag! — showing prices rose 0.5% during the month while the NAR’s latest existing home sales reading showing the pace of sales fell 10.5% in November. In a post on Tuesday, Logan Mohtashami, a mortgage professional and financial commentator, outlined how a delay in mortgage processing due to new rules put in place by the CFPB in October likely took a bite out of Tuesday’s numbers.
- Chipotle shares fell about 4.5% on Tuesday to close below $500 a share for the first time since early 2014 after Monday saw more E. coli news dog the fast food chain as a separate breakout in three states was tied to the restaurant. Regulators are still at a loss for what ingredient may be causing the outbreaks. Analysts a JP Morgan, however, have seen enough and cut their rating on shares of Chipotle to “Neutral” from “Overweight,” with John Ivankoe writing, “At this point, even rational and informed consumers could potentially be given reason to pause when choosing Chipotle over the plethora of fast-casual competition in the marketplace.” Better late than never, maybe.
- Larry Summers would like you to know he disagrees with the Federal Reserve. In a post on Tuesday, Summers outlined his grievances with how the Fed, which last week raised interest rates for the first time in over nine years, has gone about conducting monetary policy of late. Summers’ complaints, however, will come as no surprise to many folks who read this site or others as the risk of the economy falling into “secular stagnation” featuring prominently.
- Wall Street is more or less throwing in the towel on 2015 and, as a result, is spending much of its time looking back on the year. Wells Fargo was up on Tuesday turning in a series of chart that told the story for the markets and the economy in 2015, with continued dominance of the US economy on the global scene, the decline in US manufacturing while service jobs held up, and the return of full-time workers all featuring.
And of course Wells also found that millennials are just like everyone else. But in their own way. “Millennials have frequently been portrayed as a generation that does things differently, particularly when it comes to housing,” the team at Wells wrote.
“Yet, part of Millennials’ retreat from the housing market comes as they are waiting longer to get married and start families … The pushback in the timing of marriage and children is a trend that dates back to the Baby Boomers, suggesting that millennials are not so different than prior generations and that home buying will be delayed, but not entirely forgone.”
- Reminder: Wednesday marks the final full day of trading before a half day on Thursday and an off day on Friday for Christmas. The economic calendar, we’ll remind readers, is also jam-packed. At 7:00 a.m. ET we get the weekly read on mortgage applications. At 8:30 a.m. ET personal income and spending will cross the wires, as will durable goods orders. Both releases will cover November data. New home sales for November and December’s final reading on consumer confidence from the University of Michigan will round out the action at 10:00 a.m. ET.