U.S. Stocks Retrace On Dismal Economic Data
No doubt about it, the Q2 GDP data is about as bad as it can get. However, the -32.9% did beat consensus estimates (-34.1%).
There’s bad economic data and then there’s bad economic data. This morning brought the latter, with U.S. GDP posting an all-time record decline. One would think that this type of report would send stocks tumbling; and, initially, it did. However, the DJIA DOW (-237), S&P 500 SPX (-18), and NASDAQ (+19) have pared losses, trading well off intraday lows.
Without further delay, here’s a look at this morning’s key economic releases:
Event Actual Projected Previous
Continuing Jobless Claims (July 17) 17.018M 16.200M 16.151M
Core Personal Consumption (Q2) -1.1% 1.0% 1.6%
GDP (Q2) -32.9% -34.1% -5.0%
Initial Jobless Claims (July 24) 1.434M 1.450M 1.422M
As we’ve talked about over the past few months, the Jobless Claims numbers can be misleading due to enhanced COVID-19 benefits. These benefits are due to expire tomorrow. Be on the lookout for a dramatic downturn in Jobless Claims beginning August 13.
No doubt about it, the Q2 GDP data is about as bad as it can get. However, the -32.9% beat expectations (-34.1%). Right now, the pressure is on Q3 GDP. If it disappoints, then risk assets will likely be in for an extended period of pain.
GDP Data Prompts S&P 500 Reversal
Below is a look at the September E-mini S&P 500 as of Wednesday’s close. Since then, the strong week has pulled back and the 78% Retracement (3125.75) is coming into view.
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For now, there are two levels worth watching in this market:
- Resistance(1): All-Time High, 3396.50
- Support(1): 78% Retracement, 3125.75
Bottom Line: At this point, my outlook toward the S&P 500 remains bullish. If today’s dreadful GDP data prompts a retracement, then buying the dip may not be a bad way to play the action.
Until elected, I’ll have buy orders queued up in the September E-minis from 3129.75. With an initial stop loss at 3123.75, this trade produces 24 ticks on a standard 1:1 risk vs reward ratio.
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