Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. GDP Report Good for Main Street, Maybe Not for Wall Street

Stock-Markets / Financial Markets 2010 Oct 30, 2010 - 04:28 AM GMT

By: Sy_Harding


The long-awaited report on economic growth in the third quarter was released Friday morning, and was a somewhat pleasant surprise. After declining from an annualized growth rate of 5.0% in the fourth quarter of last year, Gross Domestic Product (GDP) growth declined to 3.7% in the first quarter of this year, and to just 1.7% in the second quarter.

It had many economists worried about a double-dip back into recession, especially after economic reports for July and August, the first two months of the third quarter, showed sharp declines in auto sales, home sales, and consumer and business confidence.

Some economists were projecting third quarter growth could be as low as 0.6%, and headed to negative growth (recession), although the consensus forecast was that GDP would be up 2.1% in the third quarter.

So, it was good news for the economy that the consensus got it right, with the report showing third quarter GDP improved to a 2.0% growth rate.

Equally good news within the report was that the growth was propelled by a 2.6% increase in consumer spending, since consumer spending accounts for 70% of the U.S. economy. Federal government spending also added to GDP, rising 8.8%, following a 9.1% increase in the second quarter.

In the other direction, the U.S. trade deficit continued to weigh on growth, as imports grew by 17.4% while exports rose only 5.0%. And corporate pessimism weighed on business spending.

Although still anemic and too slow to improve the employment picture to any degree, the news that the economy turned up some in the third quarter was good news for Main Street.

However, the news may not have been all that good for Wall Street.

As I noted in my column last weekend, the Fed seemed to panic after the stock market plunged in August in its worst August in years, as economic reports continued to worsen. The Fed seemed to give up on its prediction of only a temporary slowdown in growth in the summer months but not into recession, and then a return of growth in the second half and through next year.

In early September it was suddenly hinting at, and then virtually promising, a significant round of additional quantitative easing to rescue the economy.

As a result stock markets around the world began rallying off their late August lows, and produced the rarity of a substantial rally in September and October, historically the worst two months of the year.

However, now we have the report that GDP growth did not decline further in the third quarter, but improved, while recent economic indicators show retail sales, home sales, manufacturing, and consumer confidence have all ticked up, while unemployment claims have fallen for three straight weeks

So, as I suggested in my column last weekend, the Fed may now be wishing it had never mentioned quantitative easing, or virtually guaranteed markets a large program of easing, the extent of which it will announce after its FOMC meeting next Wednesday.

Global stock markets have factored in the substantial easing program that seemed to be promised, with projections that it could amount to a ‘shock and awe’ approach of as much as $1.5 trillion. That projection and the big stock market rally factoring the expectation into stock prices, has lifted not only the stock market, but investor sentiment, which is now at an extreme of optimism and complacency often associated with market tops.

So, the market has to worry that these economic reports that are good for the economy may not be so good for the stock market, if it results in the Fed disappointing next week by initiating only a token amount of quantitative easing to keep its promise on easing, and the stock market has to factor out the shock and awe easing it spent two months factoring in.

Looking out further however, the third year of the four-year presidential cycle, historically the most positive of the four years, is now but a couple of months away.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website, and the free daily market blog,

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in