Economic data Wednesday revealed the nations GDP contracted -.1% vs 1% expected & prior 3.1%. Most of the decline was attributed to inventories and a large decline in defense spending. There was plenty of spin surrounding this data. Some blamed this is what austerity might look like with less spending (Keynesians) while others just accepted the data for what it was—not good. Markets initially shrugged to the news knowing bad data means more Fed QE which is always bullish. ADP Employment Data rose slightly (192K vs 172K expected & prior revised sharply lower to 185K from 215K). Some, including me, don’t think much of this report generally since it’s too volatile and in the end, unreliable.

Tuesday’s Consumer Confidence severe drop (58.6 vs 65.1 expected & prior 66.7) was a shocker reflecting higher payroll taxes and perhaps slightly influenced by debt ceiling negotiations. Since I wasn’t posting Tuesday it seems the only conclusion was more of the “bad news is good” meme which dominates trading with ZIRP & QE keeping training wheels on bullish investors.

The Fed announcement contained little new information except a mention that weather was one cause for the GDP decline. (When in doubt, whip that one out.) Fed policies were left unchanged so QE will remain in place providing that proverbial tailwind pundits love to cite.

We now turn to more earnings, Jobless Claims and Friday’s big employment report. Both of these employment reports will be misleading given the number of people falling off the employment rolls.

The dollar (UUP) fell sharply on the GDP data while gold (GLD) bounced as it should given dollar weakness. Stocks fell modestly and selling picked-up downside speed in the last hour of trading. Leading sectors lower were small caps (IWM) and housing (ITB). Bonds (TLT) prices fell and yields rose. Commodities (DBC) rose with gains in energy (USO) and metals (JJC).

Volume was once again modest and returning to levels last seen in 2006 and early 2007. Breadth per the WSJ was negative overall.

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