Stocks Up Thanks To GDP

    May 26, 2005
    Chris Crum

Yesterday, U.S. stocks fell due as a result of rising oil prices, but today the picked back up thanks to a government report saying that the gross domestic product has grown more than expected.

The Dow Jones industrial average climbed 56.97, or 0.5%, to 10,514.77 in afternoon trading today while the Standard & Poor’s 500 index went up 6.09, or 0.5%, to 1,196.10, and the Nasdaq composite index jumped 15.85, or 0.8%, to 2,065.97.

In April, the GDP for the U.S. was estimated to grow at a rate of 3.1% in the first quarter of 2005. This estimate was exceeded. A report from the Commerce Department says that the GDP grew at an annual rate of 3.5% for the first quarter. The better-than-expected rate comes as a result of fewer imported goods and services than previously estimated. According to AP,

Bonds edged higher after the previous session’s selloff. The yield on the 10-year Treasury note fell to 4.08 percent from 4.09 percent late Wednesday. The dollar rose to a new 2005 high against the euro as pessimism over the new European constitution weighed on the 12-nation currency, and the dollar rose against most other currencies as well. Gold prices fell.

Analysts said the GDP report could keep the market from suffering another slump, as it did in April when the Dow nearly fell through 10,000. The economy appears to have achieved a balance between economic growth and inflation that makes it likely the Federal Reserve will continue with its plan to raise interest rates gradually.

“The 3.5 percent pace is really a safe and solid pace for the economy to grow. By that I mean, it is not so fast that you can have an inflationary accident and not too slow to create new jobs,” noted Stuart Hoffman, PNC Financial Services Group’s chief economist. “It is right on the economy’s speed limit.”

The rate is still lower than that of the fourth quarter of last year, which was 3.8%. Consumer spending has been down since then in what economists refer to as a “soft patch”.

Like the economy, the job market seems to be recovering as well. In April, the number of new jobs in the U.S. climbed to 274,000, compared to 146,000 in March. New claims for unemployment insurance increased last week by only 1,000 according to the Labor Department. The employment report for May will be released next week. Economists are expecting about a 175,000 increase in new jobs.

Chris is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.