RSS Feed (xml)
PB : Md. Moshiur Rahman sponsored by www.careerbd.net and www.24hournews.blogspot.com
The Commerce Department revised its estimate of gross domestic product - the measure of total goods and services output within U.S. borders - up from a 3.4% rate that it published a month ago. The revision was in line with Wall Street economists' forecasts and far outstripped the first quarter's anemic 0.6% rate of expansion.
Key sources of the upward revision in second-quarter growth were healthier business investment and a better trade performance than the department estimated a month ago.
The growth rate was the strongest pace in more than a year despite weakness in housing.
But the growth spurt could be short-lived. There are concerns that the recent turmoil in financial markets, a result of a spreading credit crisis, could seriously dampen economic activity in the second half of this year.
GDP growth may have slowed to just above a 2% annal rate in the current quarter and many analysts believe growth will slow even further in the final three months of this year as the full impact of the recent market turmoil is felt.
The worry is that the roller coaster ride in stocks and spreading credit problems will shake consumer and business confidence and cause cutbacks in spending and hiring plans.
However, analysts believe the Federal Reserve will act to avert a full-blown recession. If financial turmoil persists, they think the Fed will wield its major policy tool, cutting its target for the federal funds rate, the interest that banks charge each other. That rate has been at 5.25% for more than a year, but investors are starting to hope that the Fed will begin reducing it in quarter-point moves starting at their next meeting on Sept. 18.
The Fed on Aug. 17 cut a less economically significant rate, its discount rate, and has injected billions of dollars into the banking system in an effort to keep credit markets operating in the face of the turmoil. Federal Reserve Chairman Ben Bernanke may offer hints about the Fed's next policy moves when he delivers remarks at a Fed conference on Friday.
There was scant evidence of any inflation problem in the second quarter. So-called core prices that exclude food and energy items rose at a low 1.3% rate instead of 1.4% as previously thought, down from 2.4% in the first quarter and the lowest since a matching 1.3% in the second quarter of 2003.
In other economic news, the Labor Department reported that the number of newly laid off workers filing for unemployment benefits rose to 334,000 last week, an increase of 9,000 from the previous week. That gain caught analysts by surprise. They had been expecting a decline of around 2,000.
Wall Street worries about Fed
Futures still point to negative start despite strong GDP data as investors ponder whether central bank will cut rates; jobless claims rise more than expected.
U.S. stock futures were weaker Thursday despite encouraging data on the health of the economy as investors pondered whether the Federal Reserve will cut short-term interest rates.
At 7:06 a.m. ET, Nasdaq and S&P futures were lower, pointing to a pullback for stocks at the open.
The Commerce Department on Thursday reported that the economy continued to expand at a healthy pace.
According to the latest government read, the U.S. economy grew at 4 percent in the second quarter, its fastest pace in more than a year.
Economists surveyed by Briefing.com had forecast a 4.1 percent annual rate of growth for the second quarter, up from its previous estimate of 3.4 percent.
Separately, the Labor Department reported that the number of newly laid off workers filing for unemployment benefits rose to 334,000 last week, an increase of 9,000 from the previous week. However, economists were forecasting a decline of 2,000 new claims to 320,000.
Stocks had rallied Wednesday on hopes that the central bank would intervene in markets. In a letter sent to Sen. Charles Schumer (D-N.Y.), Bernanke said the Fed was monitoring the trouble in financial markets and prepared to step in and take action if necessary.
The comments raised expectations that the Fed will cut rates and helped the Dow Jones industrial average gain nearly 250 points. Asian stocks rebounded overnight, and major European markets rose in early trading on Thursday.
Investors will look for more clues about what the central bank intends to do with rates on Friday, when Bernanke is due to give a speech about monetary policy and housing in Jackson Hole, Wyo.
Hopes that the Federal Reserve will cut rates were hit after a report in The Wall Street Journal said the central bank may not rush to the rescue of investors.
Fed Chairman Bernanke wants to break the assumption that central bank will cut rates whenever there is turmoil in financial markets, the report said.
In major corporate news, private equity firm Kohlberg Kravis Roberts is in talks with banks over the terms of its pending buyout of First Data (Charts, Fortune 500), according to the Journal.
Toyota (Charts) President Katsuaki Watanabe said problems in the U.S. subprime mortgage market could affect the car maker's sales there.
Yahoo's (Charts, Fortune 500) top sales executive is leaving the company in the latest reorganization move by President Susan Decker, said the company.
On the earnings front, Sears Holdings (Charts, Fortune 500) reported a steep 40 percent drop in second-quarter profits, although sales were essentially in line with Wall Street estimates. H&R Block (Charts, Fortune 500) said its losses ballooned, and Tiffany (Charts) reported lower profits.
Freddie Mac, the nation's second-largest mortgage buyer said its second-quarter profit fell 45 percent.
Also due before the bell are earnings from Del Monte (Charts). PC maker Dell (Charts, Fortune 500) is scheduled to post results after the market close.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.54 percent from 4.57 percent late Wednesday. Bond prices and yields move in opposite directions.
Oil prices gained, with U.S. light crude for September delivery adding 35 cents to $73.86 a barrel
No comments:
Post a Comment