Stocks Trim Early Gains

A better-than-expected second estimate of second-quarter GDP combined with a drop in weekly unemployment claims to get stocks off to a good start on Thursday. At approximately 3:20, both the Dow and S&P 500 abruptly faded while the Nasdaq maintained its advance.

In attempting to figure out what precipitated the retreat, a look at the Chicago Board Options Exchange Volatility Index (VIX), reveals that market volatility jumped at the same time. In light of the fact that, in addition to its reputation as the “fear index” the VIX has assumed a newfound role as the “Taperometer” (since it has been measuring investor fear that the Fed will taper its bond-buying in September), the moves may have occurred because investor fears of the “Septaper” were re-ignited. There may have been some commentary that Thursday’s strong economic data will convince the Fed to proceed with the September cutback.

Despite the late-day pullback, both the Dow and the S&P 500 managed to finish the session in positive territory, while the Nasdaq demonstrated more strength at the closing bell.

The Dow Jones Industrial Average (DIA) picked up 16 points to finish Thursday’s trading session at 14,840 for a 0.11 percent advance. The S&P 500 (SPY) rose 0.20 percent to close at 1,638.

The Nasdaq 100 (QQQ) advanced 0.69 percent to finish at 3,093. The Russell 2000 (IWM) jumped 1.03 percent to end the day at 1,026.

In other major markets, oil (USO) sank 1.28 percent to close at $38.58.

On London’s ICE Futures Europe Exchange, October futures for Brent crude oil fell $2.18 (1.87 percent) to $114.43/bbl. (BNO).

December gold futures declined by $11.90 (0.84 percent) to $1,406.90 per ounce (GLD).

Transports coasted through Thursday’s session, with the Dow Jones Transportation Average (NYSEARCA:IYT) advancing 0.29 percent.

In Japan, stocks surged as the yen weakened to 97.45 per dollar during Thursday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Suzuki shares skyrocketed 2.91 percent. The Nikkei 225 Stock Average jumped 0.91 percent to 13,459 (EWJ).

In China, stocks declined slightly in Shanghai while making gains in Hong Kong after four of the nation’s largest banks reported record-high net incomes by getting control over bad loans. The Shanghai Composite Index declined 0.19 percent to 2,097 (FXI). On the other hand, Hong Kong’s Hang Seng Index surged 0.84 percent to end the session at 21,704 (EWH).

European stocks recovered some of their recent losses on Thursday after Britain and France decided to await the results of a United Nations investigation into Syrian chemical weapons attacks before agreeing to a military strike on the rogue nation (VGK).

The Euro STOXX 50 Index finished Thursday’s session with a 0.57 percent advance to 2,758 – climbing further above its 50-day moving average of 2,723. Its Relative Strength Index is 45.85 (FEZ).

Technical indicators revealed that the S&P 500 remained stuck below its 50-day moving average of 1,659 after finishing Thursday’s session with a 0.20 percent advance to 1,638. At this point, a head-and-shoulders pattern has formed on the S&P chart, from the period beginning in early May through the present. (There already had been a pinhead-and-shoulders pattern running from the period beginning on July 10 through August 16.) Its Relative Strength Index rose from 37.44 to 39.11. The MACD is below the zero line as well as the signal line, suggesting a decline.

For Thursday, all sectors were in positive territory, except for the utilities sector and the energy sector, which fell 0.59 percent and 1.04 percent, respectively.

Consumer Discretionary (XLY): +0.48%

Technology: (XLK): +0.54%

Industrials (XLI): +0.29%

Materials: (XLB): +0.32%

Energy (XLE): -1.04%

Financials: (XLF): +0.23%

Utilities (XLU): -0.59%

Health Care: (XLV): +0.30%

Consumer Staples (XLP): +0.41%

Bottom line: A better-than-expected report on initial unemployment claims and the upward revision of second-quarter GDP to indicate a 2.5 percent annual rate of expansion from the initial estimate of 1.7 percent gave stocks a boost on Thursday.

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