Market Action: Taper Concern Still Hovers

Stocks again retreated on good news during Thursday’s session, proving that taper fear is not gone — it has just been reduced to taper “concern”.

Just when you thought it was gone – it’s back. After stocks managed to advance last Wednesday following three positive economic reports, financial commentators had reached the conclusion that the Federal Reserve’s new mantra, “tapering is not tightening” had finally sunk in, and that investors no longer had the same fears concerning cutbacks to the Fed’s bond purchases.

Thursday’s trading action demonstrated that the only difference is that the fear has been reduced to concern. Instead of a huge stock selloff in the wake of positive economic data, we saw a more restrained, 0.43 percent decline in both the Dow and the S&P 500. The yield on the ten-year Treasury note rose slightly to 2.87 percent.

On Thursday, the Bureau of Economic Analysis released its second estimate of third quarter GDP, which jumped to a 3.6 percent rate of annual expansion from the initial estimate of 2.8 percent growth. The Department of Labor reported that for the week ending November 30, the advance figure for initial unemployment claims was down to 298,000.

The number represented a 23,000-claim reduction from the previous week’s 321,000 claims. Economists had been expecting an increase to 322,000 claims. This report, following on the heels of Wednesday’s better-than-expected ADP National Employment Report, has raised expectations that Friday’s release of the November non-farm payrolls report from the Bureau of Labor Statistics will bring another upside surprise.