Stocks are chopping around the unchanged line on Wednesday in response to some stronger-than-expected economic reports, including the government’s first estimate of second quarter GDP growth. The Dow Jones Industrial Average tested below its 50-day moving average for the first time since May — a bout of volatility investors haven’t seen for a long time.
Normally, good news would be considered good news. But these days, with the market so dependent upon cheap-money stimulus from the Federal Reserve, any indication of a strengthening economy (and rising inflationary threats) is considered bad news since it brings forward the likely timing of the first short-term interest rate hike.
Indeed, the policy hawks are already making their reservations known with Dallas Fed president Richard Fisher letting loose with a Wall Street Journal op-ed on Tuesday titled “The danger of too loose, too long.”
In today’s Fed meeting statement, Philly Fed president Charles Plosser dissented and voted against the statement because of his objection to the commitment to hold interest rates near 0% “for a considerable time” after the QE3 bond buying stimulus ends (likely in October, and ratcheted down another $10 billion today) because “such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee’s goals.”
Here are three things you need to know about the economic data heading into the next big data release that could change the calculus for the Fed — Friday’s jobs report — and what you should do in the meantime.