A strong third-quarter pushed US stock indices into record territories.
Tuesday, December 23, 2014
Wall Street advanced Tuesday morning on the news that the US economy had its best period of growth in over a decade during the third quarter, reported The Wall Street Journal. Consumer spending and business investment were both strong and gross domestic product grew at a 5% annual rate – the fastest pace since the third quarter of 2013 and up from the second quarter’s 4.6% pace, per Commerce Department figures.
The Federal agency had previously forecast third-quarter GDP growth to be 3.9%, while analysts surveyed by The Wall Street Journal had predicted 4.3% growth. Both numbers were easily outpaced by the actual results and the stock market rose accordingly.
The S&P 500 set a new intraday record at 2,085 after it opened 0.3% higher. The Dow topped 18,000 for the first time ever with a 0.3% advance of its own. The Nasdaq also strengthened at Tuesday’s open with a 0.2% increase.
US market continues its rally
The US stock market rallied from an early-month decline with the strongest 4-day performance in three years, according to Bloomberg, and it appears that recovery will continue today. As of yesterday, the S&P 500 had gained 5.4% in the 4-day stretch following the Federal Reserve’s statement that it would not rush to an interest rate hike.
“The market was roaring yesterday, and going into the end of the year it keeps pushing higher,” Stephen Carl, principal and head equity Williams Capital Group LP in New York, told Bloomberg in a phone interview. “These numbers are adding fuel to the fire. The Fed is part of the fueling of everything, and you have to couple that with the year-end push.”
Monday’s advance for the S&P 500 marked the fifth time this year the index recovered from a loss of 4% or more, but it was the fastest bounce back of those instances. The latest push took 17 days to complete, while other rallies required about a month to erase losses.
Consumer spending, business investment drive GDP gains
The Commerce Department indicated that robust spending from both consumers and businesses were the engine of GDP growth in the third quarter, according to The Wall Street Journal. Consumer spending increased at an annual rate of 3.2%, higher than previous estimates of 2.2%. Goods and services, household spending and health care outlays contributed to the growth.
Business spending was also stronger than initially expected. Fixed nonresidential investment in structures increased at a 4.8% rate after early estimates pegged growth at 1.1%. Intellectual property products spending reached an 8.8% pace – good for a 2.4% increase over expectations.
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