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Economy much weaker than expected

Gross domestic product slowed to a 0.6% growth rate in the fourth quarter, raising both recession fears and hope for another deep Fed cut.

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By Chris Isidore, CNNMoney.com senior writer

January 30 2008: 8:51 AM EST

Economic growth was much weaker than expected.

NEW YORK (CNNMoney.com) -- The economy grew at a much slower pace in the last three months of the year, according to a government report Wednesday that came in well below Wall Street expectations.

The report raised fears of a recession and hopes for another significant interest rate cut by the Federal Reserve.

The gross domestic product, the broadest measure of the nation's economic activity, grew at an annual rate of 0.6%, adjusted for inflation, in the fourth quarter, according to the Commerce Department, down from 4.9% in the final reading of growth in the third quarter. Economists surveyed by Briefing.com had forecast GDP would slow to a 1.2%.

The report comes amid rising concern that the U.S. economy is falling into a recession, with some economists arguing the downturn started in the final month of 2007.

It also comes as the Fed concludes a two-day meeting to consider whether or not to cut interest rates once again in order to spur the economy and ward off a recession. The central bank has already lowered rates by 1.75 percentage points since September, including an emergency 0.75 percentage point cut, also known as a 75 basis point cut, a week ago.

Investors are betting that the Fed announces at least another quarter percentage point cut, or 25 basis points, when it announces its decision at 2:15 p.m. ET, with those buying fed funds futures on the Chicago Board of Trade were pricing in a 70% chance of a half-point, or 50 basis point cut, ahead of the GDP report.

But while the weakness in the report suggested that the Fed might move aggressively to cut rates, the inflation readings in the report could be a concern for the central bank. The so-called price deflator, which measures prices overall, rose at a 2.6% annual rate, up from only a 1% rise in the third quarter but in line with forecasts.

Perhaps of greater concern is that the so-called core PCE deflator - a more closely watched inflation reading that measures prices that individuals pay excluding volatile food and energy prices - rose 2.7%, up from a 2.0% reading in the third quarter and nearly double the 1.4% rise in the second quarter.

The Fed is generally seen as wanting to see that reading rise between 1% and 2%, meaning the latest reading is far from its so-called comfort zone

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30-Jan-2008 22:02

Straits Times Index / STI to cross 3000 boosted by long-term investors

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the economic data is out. US GDP grew by 0.6% only in 4Q, way down from the 1.2% forecasted, and the 4.9% in the 3Q. cfm recession lah. fed will def cut; their hands are tied. but it's gonna be a dead cat's bounce either way. cmi.

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30-Jan-2008 21:19

KXD / Crazy Big Sales ?

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yea. have read the AR. NAV is indeed high, but as terence noted, EPS is very low. plus cash flow dropped by almost half; gross profit increased but revenue declined, as co itself noted: due to increased competition.

technically, when a stock drops from its high of 20c to 3c with no abating, it's a sign to stay out.

fyi, not vested.

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30-Jan-2008 21:03

Entertainment / Fellowship of the Shares

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btw, what happened to huatah? hope he didn't lose more than his pants and shirt... >~<

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30-Jan-2008 20:51

Entertainment / Fellowship of the Shares

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nah. am quite a homebody. dun think i'd feel useless at home....

but dun intend to be full time trader anyway. see how it goes lah. all i know is, i def need a break right now. the dang civil service has taken the civility right outta me. >~<

i need someplace where imagination is important....sigh.

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30-Jan-2008 20:48

Straits Times Index / STI to cross 3000 boosted by long-term investors

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keke. i see my lil bro's picking up very fast, eh? keke. kid, couple that with all the stuff i've taught you over the mths (esp the signals), apply some discipline, and you'd do just fine! :)

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30-Jan-2008 13:19

YZJ Shipbldg SGD / Massive selldown for Yangzijiang

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busy with wk, no time to explain in detail. but briefly, don't touch this counter today/short term.

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30-Jan-2008 13:05

Entertainment / Fellowship of the Shares

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hi singaporegal,

yea, my trouble's precisely what you said: that i tried to make changes when the rest are contented with status quo.

thanks very much for your advice, livermore. it is much consolation and comfort. :) i hope your portfolio's doing well yea. i know our styles of trading are v different; but i must say, yours does work for you, so just stick with it and never mind the rest! :)

and yea well, they can bring me down all they want; doesn't quite matter anymore. it'd just be character smearing, which in the end doesn't look good on them. as long as the top mgmt knows, that's good enough for me. the pity always is that top mgmt is intelligent, but middle mgmt can't quite cope.

no one bullies an elf.

and sigh. manikamaniho, may i just repeat, really, the stock market is the LEAST of my problems.

ok, gotta be good and do some wk. cya guys! :) thanks for being friends. :)

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28-Jan-2008 21:23

Entertainment / Fellowship of the Shares

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hm. yea sporeguy, i do agree about resilience, but then, to what extent, and for what purpose?

if realism of bureaucracy crosses the very ideals of why you joined the place? and at the end, at what personal cost, really. is it worth. that's my qn. cos frankly, if i'm left alone to do the work i wanna do, i'd be damn happy. the trouble is always the damn politics that ppl who can't work like to play (and yes, micromanage. >~< you can't micromanage an elf for goodness' sake.)

btw, wld like to thank you for recommending the lun yu programme; have caught a few episodes; very educational and enjoyed it a lot. :)

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28-Jan-2008 21:12

SGX / SGX

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likely to gap down on opening with an intraday high-low range of ~90c, final close = lower than opening px. approx 20c lower is my guess.

only for tmrw. caveat emptor as usual.

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28-Jan-2008 21:04

Entertainment / Fellowship of the Shares

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hey singaporegal,

think, as long as there are ppl around, there will always be politics. so it's simply a matter of finding a crowd that suits you.

elfie is perhaps too idealistic for the civil service. still up in the air tho; irony is: the two top directors want to keep me, but my boss is quite happy to see me go. middle mgmt. kaoz. anyhow, have given my terms. don't think the civil service is open enough to accept it, but let's see. would breathe freer outside of it anyhow.

haha, taybc, will always trade/invest whether i have a job or not. i live and breathe the markets. it's a matter of balance. if you go long term, or fixed scalps (set prices), you don't quite need to watch all the time.

likely not full time trader tho. altho i should like to. kinda like, if i can make one mth's salary in a day, why on earth do i wanna work 10 hrs, dealing with bureaucrats, getting stressed, upset etc for. sigh. but my parents would freak. so ah well. (or perhaps more realistically: just make 500 per day, 40 weeks a year. count 12 weeks as net zero. it is quite possible to do so.)

anyone has job openings for an elf? hahaha.

sigh. elfie is blue. sigh.

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28-Jan-2008 15:23

Entertainment / Fellowship of the Shares

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haha, thanks you guys. haven't had time to watch market today; did manage scalps on yzj, sgx and ezra last week to today tho.

yea idesa, everyone loves gold *sigh* dang thing shooting up too fast.. not a good sign for general market. was only expecting the spike to come after jan 29/30. only managed to get 2/3 of what i wanted! shdn't have bought for others first. Smiley

ok, gotta go. wk busy...trying to hand in resignation letter....big debate....sigh.

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27-Jan-2008 22:31

Entertainment / Fellowship of the Shares

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ah. missed it. yes idesa, i know you were joking/trying to cheer me up. thanks for it. :)

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27-Jan-2008 22:30

Entertainment / Fellowship of the Shares

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yea, gotta be careful with averaging down--which was why i said it only works on some counters. like what shplayer pointed out: only on the fundamentally sound ones, so you must know FA to choose to average down.

wide px dif: ie, don't buy just cos it's a 2c or 5c drop. you'd likely just be sinking in further and further. you need to have set target levels that are spaced apart, such that in the end, your ave px is dropped by quite a bit, rather than a few cents only.

eg, yzj: if you'd bought at 2.5, you wouldn't choose to ave down at 2.4, or even 2.2 (esp when charts read down). you'd maybe have bought the 1.2 low. which'd then bring your cost px down to abt 1.85. more manageable for the counter to hit that px than a 2.30+ target, if you look at it mathematically.

k, little elf off to sleep. nites all.

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27-Jan-2008 11:08

Entertainment / Fellowship of the Shares

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just my opinion, but i wouldn't play sti warrants anymore. for one thing, with only 30 component stocks, it becomes much easier to manipulate the index, so gotta be wary of sudden dips and spikes. HSI warrants may be a better idea. havent went there yet tho; new field to me. am focusing long term to cut out all the headaches of having to scalp short term in a volatile market.

averaging down can work; but it must be done only on some counters, and takes a certain amount of calmness to do it. you must know both techs and fundamentals if you want to average down. plus assuming you have spare funds and didn't whack all at one shot.

eh...eldarchen, you have got to make the buy/sell call yourself leh....mon to wed is definitely gonna be volatile, so i won't even bother predicting; gotta go by live play on the specific day itself. do take care and glue your eyes to the screen. :P

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