When Wall Street gets done tearing apart the GDP report and figuring out what made it tick, I don’t think they’re going be very happy, I said on the News Hub today. And frankly, I won’t be surprised if today’s rally fades pretty quickly.
Like I wrote this morning, I want to see how good consumer spending looks when the consumer isn’t spending Uncle Sam’s money.
Bulls light it up again, turning another prior-day selloff into a buying opportunity. It’s become routine by now, but positive 3Q GDP and renewed punishment of the US dollar spark a flood back into all the stocks that got smoked yesterday. So much for those heightened concerns about the strength of a global economic recovery.
Emerging market stocks bounce higher than they fell yesterday, and oil nearly does the same. Meanwhile, the US dollar index relinquished almost all its gains yesterday. Financials go berserk to the upside, followed by materials and consumer discretionary.
If 10M folks weren’t collecting unemployment benefits, we’d think prosperity had broken out.
DJIA climbs 199.89 to 9962.58, and Nasdaq Comp adds 37.94 to 2097.55. S&P 500 ends 23.48 higher at 1066.11.
Bulls maintain stamina throughout the session.
Barron’s Bob O’Brien had a very astute observation this morning. He said bulls were facing their “stiffest test since the bears wrested dominion over the market from them nearly two weeks ago.”
Well, bulls passed this test with flying colors.
The Dow finished up 200 at 9963, closing near session highs and capping the biggest single session gain since July 15, when the index rose 257. S&P 500 gained 23 to 1066.
A better-than-expected GDP report alleviated concerns about weak housing and labor data seen earlier this week. The worries sent the S&P 500 down for four straight sessions and six out of the last seven.
The market recently has seen a pattern where stocks give up intraday gains and fall into the close. But stocks broke that pattern Thursday and rallied with momentum into the close.
So GDP turns around, but it’s not cinch that brighter days lie ahead. Pity the poor multinational oil company that clears only $4.7 billion in a quarter, and the Fed is done buying Treasury bonds.
It’s Tomorrow’s News Today.
Don't celebrate GDP growth just yet
GDP increases for first time in more than a year as government stimulus boosts consumer spending. Hold the champagne, however, as a weak labor market continues to subdue the recovery.
GDP rose 3.5% in 3Q, higher than the 3.2% growth economists were expecting, and much better than Goldman Sachs’ downwardly revised estimate yesterday of 2.7% growth.
“At long last, the American economy is growing again,” the Economist’s Free Exchange blog says. “Jobs, however, are still tricky to come by.”
Jobless claims remain elevated at 530,000 and even though continuing claims fell to their lowest levels since March, this mainly reflects exhaustion of benefits.
“So while the end to contraction has stopped the labor market bleeding, recovery has yet to begin the healing,” blog says. “Growth is good, but absent job creation it is difficult to get too excited.”
So, does 3Q GDP growth mean the longest recession since the Great Depression is actually over?
Tough to say at this point, especially considering all the factors the National Bureau of Economic Research uses to define a recession, FusionIQ CEO Barry Ritholtz writes at The Big Picture.
Jobs are still being lost at a rapid pace, industrial production is soft and retail sales have been essentially flat. NBER believes the economy’s either expanding or contracting, but Ritholtz says a third possibility should be considered: none of the above.
“The economy might have reached a state of stasis – a balance where it neither expands nor contracts,” he says.
It's a new day, citizens.
Who says Goldman knows everything?
GDP rose by a sharp 3.5% in the 3Q, a bit ahead of expectations of 3.2%, giving a flagging stock market some more fuel, and putting it on track to possibly erase yesterday’s losses.
The big fuel for growth was one that’s been absent lately: consumer spending, which jumped 3.4% in the quarter, from a 0.9% drop in the 2Q. “Economists said the massive stimulus injected by the U.S. government, such as the cash for clunkers program that lifted car sales, helped boost consumer spending,” Dow Jones reported.
Really? You think? We can’t wait to see what consumer spending looks like once consumers aren’t spending Uncle Sam’s money.
S&P futures up 10.60; DJ futures up 87. Ten-year down, yield at 3.47%. Oil’s up a buck, and speaking of bucks, the US dollar index has given back some gains.
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