The major averages managed to recover some of their lost early ground entering the final hour with large losses, despite generally positive economic data. Since Monday the major averages have been hit hard with the Standard and Poors 500 Index down 105 points or 3.8%, while the NASDAQ has lost 290 points or 3.9%. This sent the Standard and Poors 500 Index into the red for the year, the NASDAQ is still holding a 70-point gain.
Preliminary 3rd quarter Gross Domestic Product or GDP beat expectations with a 3.5% gain. The inflation measuring Personal Consumption Expenditures price deflator or PCE fell hard to just 1.4%, less than half the 2nd quarter figure and a 5-quarter low. Once again inflationary pressures prove transitory and largely driven by energy prices. The threat, and application of significant tariffs in the 3rd quarter led businesses to sharply increase inventories that accounted for 2.07% of the 3.5% gain reported. Also tariff related net exports lopped 1.78% points of growth off the total, trade was expected to be a significant drag on GDP going in. Per the BEA or Bureau of Economic Analysis. Fixed residential investment was negative for a 3rd consecutive quarter and 5 of the last 6 quarters. The trade war could well prove costly in the 4th quarter with respect to economic growth, unless things change and that doesn’t look very likely at this point.
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