Stocks on Wall Street rallied for a fifth straight session on Tuesday, pushing the Dow Jones above 18,000 and to a new all-time high. The market was giving a big lift by encouraging macroeconomic data, which came in a flurry today and paints a rosy picture for consumer spending in the current quarter, as well as offering an improved view on GDP in the last quarter.
By Peter Martin
Wednesday, December 24, 2014
By early afternoon in New York, the Dow Jones Index was up 105 points or 0.58% at 18,064, just a handful of points away from the new intraday high of 18,068.58 set earlier in the session. The S&P 500 Index, a broader measure of the US economy than the Dow Jones, gained 0.32% to 2085.1, also close to its newly-set record high of 2085.61.
GDP revised higher
The Bureau of Economic Analysis (BEA) released its third and final estimate for third-quarter GDP today, and it was subject to a hefty upward revision, growth coming in at an annual rate of 5.0%, a faster pace than the 4.6% seen in the second quarter. Today’s estimate is compiled from a more complete array of data than was used in last month’s second estimate (which was for an increase in real GDP of 3.9%) and means the economy was motoring along at a fast pace than previously thought heading into the final quarter of the year (the consensus estimate for today’s report was growth of 4.3%).
Hopes of that momentum not just being maintained but added to in the fourth quarter were boosted by two key reports on the consumer sector. Personal income, disposable personal income and consumer spending all rose in November. Personal income increased 0.4%, disposable personal income grew 0.3% and personal consumption expenditures (broadly speaking the value of goods and services bought by individuals) rose 0.6%. Perhaps significantly, much of this was driven by an increase in durable goods purchases – a component that tends to blossom when the economy is fertile.
Moreover, consumer attitudes are buoyant this month, helping the chances of a continuance of those strong spending levels. The University of Michigan’s index of consumer sentiment was 93.6 in the final reading for December, not much changed from the mid-month level of 93.8 and substantially higher than the 88.8 recorded at the end of November. With consumers apparently optimistic about the economy, and positive about income and employment, there is every chance of healthy spending levels over the crucial holiday period.
US dollar strengthens
The day’s bullish reports strengthen the case for hawks at the Fed arguing in favor of earlier tightening, which in turn, is a positive for the dollar. Consequently the dollar has had a good day, enjoying sizeable advances against its major peers for the most part. USD/JPY climbed 0.55% to 1.2071, rising for a fifth straight day, while EUR/USD slipped 0.48% to 1.2172. The Canadian dollar bucked the trend and strengthened against its US counterpart after Canadian GDP grew at a fast-than-expected pace in October. Statistics Canada reported that Canada’s economy grew 0.3% in October, versus a consensus estimate of 0.1%, saying in a statement that ‘notable gains were recorded in mining and oil and gas extraction as well as manufacturing.’ USD/CAD fell 0.11% to 1.1615.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.