Dow, S&P 500 resume climb even though economy grew in slowest rate since the 2020 recession in third quarter

U.S. stock-market benchmarks claim Thursday gains despite GDP undershot

10/28/2021 5:04:00 PM

U.S. stock-market benchmarks claim Thursday gains despite GDP undershot

U.S. stock indexes rise Thursday morning, despite a disappointing initial reading on the health of the overall economy in the third quarter, which reveal the...

How are stock-index futures trading? On Wednesday, the Dow fell 266 points, or 0.74%, to 35491, the S&P 500 declined 23 points, or 0.51%, to 4552, and the Nasdaq Composite ended with virtually no change to 15235.84.Even after the off day, all three major indexes are within 1% of their record highs.

What’s driving the market? The U.S. economy grew at an annualized rate of 2% in third-quarter, according to an initial reading of gross domestic product, the official scorecard of the American economy. The reading, the slowest growth rate since the 2020 recession, was far weaker than expectations of 2.8%, and was down from 6.7% in the second quarter.

Meanwhile, weekly new jobless claims fell to 281,000 in the week ending Oct. 23, marking the lowest since March of last year, from a revised 291,000 in the week prior.The data offers a muddled picture of the economic recovery from COVID-19, with the Federal Reserve set to gather next week to update its policy plans.

However, investors have been emboldened by strong results from American corporations. Update earnings have remained the main driver for the U.S. stock market’s recent uptrend, with earnings from Ford Motor Co. F, +8.70% providing some additional grist for the bulls.

Ford shares rallied after the vehicle maker late Wednesday offered an upbeat fourth-quarter forecast and said it would restore a dividend payment.Those results helped to assuage concerns about supply-chain bottlenecks and labor shortages that have dogged companies, and the overall economy, in the aftermath of the COVID-19 pandemic.

Worries that the economy is still hobbled in the wake of the pandemic and could continue to face higher prices and supply chain disruptions have been a lingering concern for market participants.Investors are also watching the actions of central banks after the Bank of Canada decision to abruptly end its bond purchasing program and said it was on a path toward interest rate increases, as the U.S.’s northern neighbor aims to combat inflation fears.

Meanwhile, the European Central Bank on Thursday, as expected, left its monetary policy measures unchanged, saying it would continue to purchase assets via its pandemic emergency purchase program at a slower pace than seen in the second and third quarters.

Those moves come as the Federal Reserve is scheduled to hold its two-day rate-setting gathering Nov. 2-3, where it is widely expected to announce and start tapering of its monthly purchases of $120 billion in Treasurys and mortgage-backed securities.“If anything, following yesterday’s news of an unexpected sharp widening of the merchandise trade deficit in September, the balance of risks to that estimate appear to lie to the downside, with net exports perhaps subtracting 1 percentage point from growth,” said Emily Nicol, economist at Daiwa Capital Markets Europe.

In political news, President Biden is set to release a new framework on the Democrats’ $1.75 trillion social spending and climate package which is aimed at winning support of congressional Democrats, according to The Wall Street Journal, citing people familiar.

Looking ahead, Inc. AMZN and Apple Inc. AAPL reporting after the close.Beyond GDP, investors will be looking for a report on pending home sales for September due at 10 a.m. ET. Read more: MarketWatch »

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