Markets May Cringe as Negative Data Flow Continues

The major U.S. index futures are pointing to a lower opening on Monday in a signal that the losing streak may be extended. An economic report released earlier in the day showed that conditions among manufacturers in the New York region improved slightly. However, the sub-indexes and the futures business conditions index showed weakness. The housing market index of the National Association of Home Builders due to be released shortly after the markets open may give decisive direction to the markets.

U.S. stocks reversed course during the week ended August 13th, as economic data took center stage once again following the subsiding of the earnings news flow. The economic data released during the week confirmed the soft patch that has set in amid the economic recovery that began in the third quarter of 2009. The selling seen during the week was broad based, with technology and commodity stocks taking the most severe hit.

Last Monday, strong data points from across the Atlantic served as a reason for buying stocks amid expectations of additional measures from the Federal Reserve ahead of the FOMC meeting. Consequently, the major averages closed moderately higher. The lack of any enterprising move from the Fed to tackle the soft patch led to selling on Tuesday, with the major averages closing notably lower.

The negative sentiment intensified further on Wednesday, with the Fed’s commentary on growth issued in the previous session working in the minds of traders. The Nasdaq Composite slumped over 3%, while the Dow Industrials and the S&P 500 Index lost more than 2% each. The major averages retreated again on Thursday, dropping moderately in the session, as the initial jobless claims report stirred up further anxiety concerning the economic recovery.

On Friday, stocks went about a volatile ride, as bargain hunting generated by the major averages languishing near 1-month lows did not pick up sufficient pace to offset the selling pressure generated by a mixed retail sales report. The session saw another round of moderate selling.

For the week, the Dow Industrials was down 3.29%, the S&P 500 Index fell 3.78% and the Nasdaq Composite Index receded 5.03%.
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