The markets roared ahead on Wednesday with the Dow Jones Industrial Average resting at its highest level since 2007 and about 100 points from an all-time high. News from Washington Thursday morning looked to be giving the bulls something to chew on that would give them more energy as February winds to a close.
In its revision of the “advanced” fourth quarter figures on gross domestic product – the output of goods and services produced by labor and property located in the United States – the Commerce Department reversed its estimate that the nation’s economy contracted by 0.1 percent during the October to December period and actually narrowly expanded by 0.1 percent. The original estimate provided in January of the U.S. GDP shrinking in the fourth quarter marked the first time in three and a half years of the economy growing smaller. The tepid growth shown in the revision was still far below the 3.1 percent GDP expansion of the third quarter and below economist predictions that the revised figure would show 0.5 percent growth. It was also the slowest rate of quarterly growth since Q1 2011.
The report from the Bureau of Economic Analysis read, “While today’s release has revised the direction of change in real GDP, the general picture of the economy for the fourth quarter remains largely the same as what was presented last month.”
Most of the softness in expansion came from businesses keeping inventories light due to fiscal cliff concerns and far less government spending. Consumer spending, which comprises nearly three-quarters of GDP, grew at a 2.1 percent annual pace.
Compared to the 2011 annual level, real GDP increased 2.2 percent in 2012, versus an increase of 1.8 percent in 2011 over 2010’s annual level.
Wall Street also cheered lower unemployment claims that were reported by the Labor Department. The number of people applying for first time jobless benefits fell by 22,000 to a seasonally adjusted 344,000 during the week ended February 23, signaling that the labor market is improving. The week prior’s figure was upwardly revised by 4,000 claims to 366,000.
Economists were expecting claims to come in at 361,000.
The four-week moving average, viewed as a better gauge of the labor market because it eliminates volatility, declined by 6,750 to 355,000. Continuing claims, or those people already receiving benefits, shrunk by 91,000 to 3.07 million, representing the lowest figure since June 2008.
While the GDP stats weren’t spectacular by any stretch of the imagination, coupling the two reports was enough to spur the bulls in action before the opening bell, but by the time the clock struck 9:30, most of the zest was gone. The Dow Jones is basically flat, down by 7 points, the S&P 500 is ahead by 1 point and the Nasdaq is green by 6 points, just minutes into the regular session. But, the day is still young.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer