While you were sleeping: US economy gathers steam
July 31 (BusinessDesk) - Wall Street was mixed after the US economy kicked into a higher-than-expected gear in the second-quarter while Federal Reserve policy makers reminded investors that the nation’s jobs and housing markets remain weaker than desired.
American gross domestic product grew at a 4.0 percent annual rate, after contracting at a revised 2.1 percent pace in the first quarter, the Commerce Department said.
“The momentum for the second half is solid,” Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, told Bloomberg News. “The big picture looks a lot brighter and is probably more accurate” than the first-quarter reading suggested.
In late afternoon trading in New York, the Dow Jones Industrial Average was 0.06 percent lower. The Standard & Poor’s 500 index gained 0.16 percent, while the Nasdaq Composite Index increased 0.54 percent.
The Dow fell as declines in shares of Coca-Cola and Pfizer, down 1.6 percent and 1.4 percent respectively, outweighed gains in shares of Nike and General Electric, up 1.7 percent and 1.1 percent respectively.
Fed policy makers agreed to cut the pace of their monthly bond-buying by US$10 billion to US$25 billion a month.
“A range of labour market indicators suggests that there remains significant underutilisation of labour resources,” the Federal Open Market Committee said in a statement.
Indeed, a separate ADP report on Wednesday showed companies hired 218,000 workers in July, fewer than expected and down from June.
“Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow,” according to the Fed. “Inflation has moved somewhat closer to the Committee's longer-run objective.”
Most took the latest Fed comments as a sign policy makers won’t hike interest rates soon.
"The fact that officials still see excess slack in the labour markets as noteworthy suggests a high level of comfort with leaving rates very low," Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington, told Reuters.
On the earnings front, Twitter was a standout. Shares soared 21.6 percent after the company posted quarterly revenue that exceeded expectations. It had reported after the closing bell on Tuesday in the US.
"We continue to believe we are in the early stages of a very long growth cycle for Twitter as it leverages cultural ubiquity, invests in product and technology, and grows the platform," Goldman Sachs analysts wrote in a report, Reuters reported, adding that Goldman maintained its "buy" rating and raised its price target to US$63 from US$52.
In Europe, the Stoxx 600 Index finished the day with a 0.5 percent drop from the previous close, as did the UK’s FTSE 100 Index. Germany’s DAX fell 0.6 percent, while France’s CAC 40 slumped 1.2 percent.