US markets closed lower for the 5th day in a consecutive session as traders have started to price in the fact, that the Fed maybe tapering soon, than initially thought. The evidence is in the recent data, which is almost consistently blowing pass the expectations, and yesterday’s GDP surprise jump to 3.6% was another evidence of this. The weekly jobless claims data released yesterday also came at a much better level than anticipated and this has reinforced fear among investor about early tapering.
This leaves us to our argument which I was making in my analysis yesterday, that perhaps there is a very little impact of the US government shutdown, and today’s data could surpass the 200K mark. But, if we look slightly more closely towards the ADP data which was released this week, and compare this to last year’s data, then we can see that an upside surprise which we experienced is down to a seasonality demand – Thanksgiving holiday.
Similar argument goes for the non Farm payroll data, as we saw the jump from 160K in October to 247K. Thus, if today’s number does surpass the 200K mark, which will be 2 months in a row, it may not be a too much of surprise. However, how the market is going to trade is this number, will be a completely different story all together. A good news may not be a good news anymore, and hence it may trigger a sharp sell off in the market, as many will anticipate an early taper.
But, let’s not just exaggerate this too much, because the same hindrance- US debt ceiling and US budget could trigger another political turmoil coming in January. And this is something very important which Fed will be mindful of.