S&P 500 Endures Sharpest Decline Since June (Bloomberg)
As economists raised their expectations for second quarter growth, U.S. investors grew concerned over an end to quantitative easing and sent the S&P 500 to its lowest level since June 24. The DOW and Nasdaq also declined. “Certainly some of the move is due to increased concern about tapering due to the very strong trade number,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said. “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 Official Sees End of Easy Money (Reuters)
Dennis Lockart, the Atlanta Federal Reserve president, suggested that quantitative easing could end as early as September if the economy continues to improve. “If we see the growth pick up in the second half and if we see a continuation of the job gains that we — not (the) 162,000 number that we saw last month but at a higher range, say 180-200,000 — I think with other fundamentals improving we probably are in a position to remove… the extraordinary policy program over the medium term — that being the asset purchase program,” Lockart said.
U.S. Trade Gap at Three-Year Low (Reuters)
According to the U.S. Commerce department, the U.S. trading gap fell in June to $34.2 billion, a three-year low. As this significantly exceeded U.S. economists’ expectations, some believe that the expansion of the U.S. economy in the second quarter has also exceeded expectations. “Today’s surprise implies a significant upward revision to second-quarter GDP,” said Laura Rosner, an economist at BNP Paribas in New York. “Our calculations suggest an implied revision of roughly plus 0.8 percentage point and our tracking estimate of second-quarter GDP growth is now 2.5 percent.”