The Stock Market Just Threw Up A “Red Flag” With Latest Drop

( In volatile trading this week, stocks fell for the third straight day on Thursday as investors reviewed new data on the current state of the economy, pricing in their concerns over the Fed’s plan to raise interest rates.

The S&P 500 flirted with correction territory for the third day this week, falling 0.5 percent on Thursday, while the Nasdaq Composite dropped 1.4 percent.

A “correction” (a 10 percent drop from the recent peak) is a signal that investors have turned more pessimistic about the market. And though the S&P hasn’t closed a day in correction territory yet, it did fall into it in intraday trading on Monday, Wednesday, and Thursday before recovering. The index is now 9.8 percent below its January 3 high.

In early trading on Thursday, stocks rebounded as much as 1.8 percent after the Commerce Department reported that GDP expanded 1.7 percent in the last quarter of 2021. At an annual rate, the Commerce Department reported, the economy expanded at its fastest pace since 1984 – something the Biden administration immediately seized on as “proof” that Biden rescued the economy.

Economists did see several positive signs in the Commerce Department report, including the jump in consumer spending and a buildup in inventories despite supply chain problems.

In a separate report on Thursday, the Labor Department said weekly claims for unemployment benefits fell last week after increasing for three consecutive weeks. Last week, 260,000 new unemployment claims were filed, down from 290,000 the week before.

According to one economist, the downtrend in unemployment is likely to continue since the demand for labor remains high and businesses are reluctant to lay off workers during a persistent labor shortage.

The current market volatility is likely to persist even after the Fed’s first rate increase sometime in March since indicators continue to back the Fed’s decision to move forward with its plan to remove support for the economy. If rising inflation continues to show no signs of abating, the Fed may be obligated to move quickly on raising interest rates in hopes of slowing down inflation.