GDP data was released Friday revealing headline economic growth of 2.8% versus consensus of 3.1%. Real economic growth after inflation was only 1.7% for 2011. Negatively affecting the data were lower state and local government spending, private inventory investment and, believe it or not, federal government spending. While the all-important, and much watched by the Fed, PCE (Personal Consumption Expenditures) was higher it was a disappointment overall. This may reflect what the Fed saw in the data (weak growth) which then caused them to keep interest rates low for a long period. They must worry this slow growth condition is going to be with us for a long time. This is hardly encouraging.
The month of January has only a couple of trading days left. Even with Friday’s poor performance the month is still scoring outsized gains for most stock sectors. Consumer Sentiment data has stock prices as a high component, so it’s not surprising the measure was 75 versus 74 expected.
From our credible and thoughtful friend, Richard Davis at Consumer Metrics, comments:
“There has been no improvement in real per capita disposable income that could warrant any increase in consumer spending, and the fourth quarter splurge on goods is likely coming from a draw-down in savings, a partially offsetting decrease in spending on services and extra "pocket money" from lower at-pump gasoline prices. At a macro level those funding sources have been augmented by an enormous expansion of student loans and (for a non-trivial portion of all households) unprecedented rent-free living as a consequence of vastly extended foreclosure proceedings. With the exception of the rent-free and student loan components (for which there simply are no horizons or painless end-games), all of the probable sources for the increased consumer spending will probably revert to historical norms during 2012.”
Ford’s (F) earnings report overall missed estimates; Chevron’s (CVX) also missed along with Procter & Gamble (PG). D.R. Horton (DHI) beat overall estimates, and so things went. As homebuilder shares like DHI continue to rise—it’s notable that lumber was one of the big losers so far for January declining 7.5%.
The dollar was weaker once again vs the euro as perhaps the short squeeze there continues. As the euro gained so too did gold and bonds. Those buying bonds must be hedging with gold. That seems silly but may be true. Most other commodity sectors were relatively unchanged.
CNBC’s Rick Santelli lays-out the unpleasant and harsh reality of U.S. debt. And speaking of debt, rating agency Fitch cut its ratings mid-day for Italy, Ireland, Spain, Slovenia, Belgium and Cyprus by 1-2 notches each. This matches similar moves by S&P as most continue to “lead from behind”. Just before the close of trading, and not to be outdone, S&P lowered the rating for Sicily from A to BBB+. They won’t be visiting sunny Sicily anytime soon at least not without coming in “heavy” as they say. And after all this the euro’s rally continued since all this is so bullish.
Facebook may file for IPO by Wednesday. I guess Mark Zuckerberg et al must be getting a little nervous about the markets and wish to get what they can now.
Stocks rebounded some from intraday lows to close mixed on Friday with most indexes lower except for tech. Breadth per the WSJ was still positive overall building on overbought conditions.

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Today from ETF Digest:
Markets were rallied enough late to make the week look okay which was the intent of those who could do this. (Any guesses as to “who” those people or groups are?)
We’re still overbought especially now on an intermediate term basis as the NYSI demonstrates. We can still move higher with earnings and whatever else. But, with volume this light and conditions stretched Mr. Market is walking on eggshells. We’ll see you again next week.
Have a great weekend. For us we’re on a generator given an ice storm.
Let’s see what happens.
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| Commodity | Quote | Change | Change % | NY |
| Gold | 1,722.90 | 1.40 | 0.08 % | 08:20 |
| WTI Crude Futr | 99.56 | -0.14 | -0.14 % | 01/27 |
| Index | Quotes | Change | Change % | Local |
| CRB | 317.57 | 0.15 | 0.05 % | 01/27 |
| US Dollar | 78.84 | -0.56 | -0.71 % | 01/27 |
| Index | Quotes | Change | Change % | Local |
| VIX | 18.53 | -0.04 | -0.21 % | 01/27 |
| MSCI | Value | Daily | MTD | YTD |
| Brazil | 3252.97 | -0.75 % | 15.08 % | 15.08 % |
| Russia | 841.57 | -0.46 % | 14.23 % | 14.23 % |
| India | 420.31 | 2.55 % | 21.13 % | 21.13 % |
| China | 59.11 | 0.24 % | 11.88 % | 11.88 % |