Strong economic news could not save the US equity markets today as the dollar index continued to rally, and commodities continued to fall. The dollar index made a new 6 month high today, and the S&P 500 index fell 10 points to 1073. The day concluded a down month for the US equity markets; it seems for the moment that the tide has turned for the bulls.
There was a plethora of strong economic news out of the US today, lead by GDP for the 4th quarter of 2009. The U.S. economy surged at the end of 2009, a bigger-than-expected gain driven more by slower inventory liquidation than by consumer spending. Gross domestic product rose a seasonally adjusted 5.7% annual rate October through December, the Commerce Department said Friday in its first estimate of fourth-quarter GDP. Economists surveyed had forecast 4.8% GDP growth during the fall.
Additionally, the manufacturing sector is seeing the expansion carrying into the New Year, a report from the Institute for Supply Management-Chicago Inc. indicated today. The group said its business barometer climbed to 61.5, the highest level since November 2005, from 58.7 last month. Readings greater than 50 signal expansion. A gauge of consumer confidence climbed in January to the highest level in two years. The Reuters/University of Michigan final index of consumer sentiment rose to 74.4 from December’s 72.5.
On the policy front, India’s central bank tightened monetary policy to counter a spike in food prices that threatens to spill over into the broader economy. But the Reserve Bank of India left key interest rates unchanged, a sign that policy makers remain concerned about not derailing one of the world’s fastest-growing economies. Following in the footsteps of China, the RBI chose to attack excess cash in the banking system but shied away from raising policy interest rates, which would have raised funding costs for companies across the board and hurt a nascent economic recovery.
This news continued to put pressure on the EUR/USD. The currency pair is sitting on the 200 week moving average, and crossed below 1.40.
