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GDP Preview: Navigating The Wake Of Results

GDP comes out on Friday and the latest data could well move the market.

On average analysts expect GDP to come in at +5.6% for the fourth quarter and +3.4% for the year.

Street Expectations

Even though the economy may have taken a step back in the last quarter, details of the report are likely to underscore a broadening recovery, with consumers taking charge. Retail sales were strong in the first quarter and analysts expect consumer spending probably grew to anywhere between a 3.5 and 4 percent rate from 1.6 percent in the fourth quarter.

Businesses are expected to have continued spending on software and equipment, supporting growth. While other segments of the economy thrived in the first quarter, investment in new home construction and structures probably declined and was a drag on growth. The weak spending reflects the fragile residential housing market recovery and persistent problems in commercial real estate.

Another drag on growth will come from a wider trade deficit as companies import more to meet strengthening domestic demand.

Market Impact

Any negative element in the data could cause the market to drift much lower. In Tuesday's sell-off, the S&P 500 blew through critical support at 1,194 and the next critical downside targets to watch, according to technicians, are 1,188 and then 1,184.

A stronger-than-expected GDP number will hurt Treasury debt prices, while a worse-than-expected figure will support the market.

Nomura Securities sees key support levels on the 10-year Treasury note yield at 3.78, 3.80 and 3.84 percent.

A bullish report would boost the U.S. dollar, especially against the yen , as it will raise expectations of an interest rate hike by the Federal Reserve.

A number that misses forecasts could dent sentiment, but any losses in the dollar will be limited as markets stay focused on debt troubles in Greece and Portugal.

*Jeremy Zirin of UBS Wealth Management tells Fast Money that he thinks this will be the fastest growth rate we see in 2010. Get all the details. Watch the video above!


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