Q3 GDP Revised Lower Again – But No One Cares

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis.” 
I continue to be amazed by the market’s non-reaction to these revisions.  Initial Q3 GDP was expected to be around +3.2%.  When it was reported at 3.5% on October 29th, it set off a 70 point rally in the S&P 500 – from 1040 to 1110.  Yeah! Our economic rebound is taking hold!  Things are getting better!  Green shoots!  (imagine those last few quips were written in sarcasm font).  On November 24th, the first revision to the report came out, “in line with consensus estimates”  at +2.8%, and stocks didn’t care.  Somehow, the consensus estimates had managed to be lowered to 2.8% without anyone noticing or repricing the market to account for the downward revisions in estimates.
Today, the GDP growth rate was further slashed to +2.2% – but again, stocks don’t seem to care, as futures are still above fair value, indicating a higher open for the market!
What would have happened if the initial GDP report came in a 2.2% instead of 3.5%?  I’d have to think the effects on the stock market would have been dire – as it would have showed that our “strong rebound” wasn’t so strong after all.   Somehow though, nearly two months later, the market is content to ignore the actual data, having happily digested the incorrect preliminary data.  Said differently, by initially reporting the Q3 GDP growth rate at +3.5% instead of +2.2%, the growth rate was overstated by nearly sixty percent!
My point is simply this: when markets reprice based on data beating expectations, it would seem reasonable to expect them to reprice (lower this time) again when that same data turns out to have not beat expectations.
Odd indeed – it tells me that this market continues to act irrationally. 

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