Stock market recovers on GDP, retailers lead rally
The US stock market is recovering from its loss yesterday as better than expected Gross Domestic Product for the fourth quarter of 2009 was reported at 8:30 am in New York. The S&P 500 Index is up 6.93 points, or 0.64 percent, to trade at 1,091.46 at 10:01 a.m.
Financial stocks are generally up, with Citigroup (NYSE:C) up 1.54 percent and regional bank PNC (NYSE:PNC) up 3.21 percent.
Retailers are leading the rally, with Wal-Mart (NYSE:WMT) up 2.3 percent, Macy's (NYSE:M) up 2.47 percent, Costco (NASDAQ:COST) up 1.46 percent, and online retailer Amazon.com (NASDAQ:AMZN) up 3.34 percent.
The dollar gained against the euro and the yen. It gained more than 45 pips against the yen and 32 pips against the euro since the release of the GDP report.
Major Asian indices were weighed down by the disappointing U.S. session on Thursday and closed at a loss. Europe markets opened higher and continued to surge on better than expected U.S. GDP results.
Commodities stocks such as Anglo American (LON:AAL), BHP Billiton (LON:BLT), and Rio Tinto (LON:RIO) are up over 1.50 percent. Banks also led the gain in Europe; Deutsche Bank (FRA:DBK) is up 2.39, Societe Generale (EPA:GLE) is up 1.77 percent, and HSBC (LON:HSBA) leads with 2.20 percent.
Fourth quarter GDP for 2009 grew at an annualized rate of 5.7 percent, up from the third quarter growth of 2.2 percent and beating expectations of 4.7 percent, according to economists surveyed by Bloomberg. The quarterly GDP shows the fastest growth rate since 2003.
While personal income and disposable income increased 4.0 and 4.8 percent, respectively, consumer spending only increased 2.0 percent. The income figures grew at a faster pace than the third quarter while consumer spending increased at a slower pace.
Personal saving was $516.9 billion in the fourth quarter and $495 billion in the third. Retailers may expect increased spending once the labor market improves and household consumption rises.
Government spending was flat, compared with an 8.0 percent increase in the third quarter. The report also showed that private businesses shed inventories at a dramatically slower pace, adding 3.39 percent to the GDP figure.
Without this boost, the GDP would have increased 2.2 percent. Excluding the impact private inventories, the third quarter figure would have shown 1.5 percent growth.
GDP decreased 2.4 percent in 2009. The price index for gross domestic purchases increased 0.6 percent for the year and at an annualized rate of 2.1 percent for the quarter.
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