GDP Surprise and Positive Jobs Numbers Send Stocks Higher

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After strong economic data was released this morning, the markets are moving higher across the board. As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 62 points, or 0.42%, while the S&P 500 and the Nasdaq have gained 0.52% and 1.01%, respectively.

There were two economic reports today: The weekly jobless-claims number and revised second-quarter GDP. Jobless claims fell by 6,000 to 331,000 last week. A number in the low 300,000 range is what most economists consider normal churn of the labor market, so we shouldn't expect this number to fall much lower than where it is, but the fact that it's in that range means that the unemployment rate in the U.S. shouldn't rise because of Americans losing their jobs. 

The revised Q2 GDP number was a pleasant surprise for most investors. The previous estimate was 1.7%, but today the Department of Commerce said it actually came in at 2.5% for the three-month period. Analysts had been expecting a 2.2% revised number, so they were also well under the actual result. Although the figure is higher than expected, it will still be difficult for the economy to meet Federal Reserve Chairman Ben Bernanke's GDP goal for the year, which is in the range of 2.3% to 2.6%. That would require the economy to grow at an annualized rate of 2.9% in both Q3 and Q4 -- which most economists don't see happening. 

Dow stocks losing out
McDonald's
(NYSE: MCD  ) is off by 0.4% today as fast-food protests have begun in a number of cities around the country. Employees have walked off the job to protest for higher hourly rates and the right to unionize. Currently, most fast-food workers receive the federal minimum wage of $7.25 per hour, and they are asking for $15.00. Making $7.25 an hour and working a full work week would translate to about $15,000 per year, which many don't consider a living wage. Today's walkout will certainly get the attention of fast-food executives, but it's unknown at this time whether the major companies will give in, or whether they'll feel any financial impact.  

Both of the Dow's big oil components, Chevron (NYSE: CVX  ) and ExxonMobil (NYSE: XOM  ) , are trading lower today. Shares of both companies were leading all Dow components just two days ago when we realized that U.S. intervention in the Syrian civil war was quite likely. Although Syria is not a major player in Middle Eastern oil-production, the threat of military action and increased conflict in the region sent the price of oil higher, and thus the shares of the oil companies followed suit. But now that it seems a strike by U.S. or allied forces would be a short-lived event, the price of oil is backing down, and so are the share prices of the major oil players. Chevron is down 0.5%, while Exxon has lost 1.3%.

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  • Report this Comment On August 29, 2013, at 5:09 PM, emferguson wrote:

    It's safe to go ahead and say $15,000 isn't a living wage without modifying it with "many don't consider". When full-time workers can't subsist without food shelves, that's not a living wage. It's time employers paid their employees without foisting it off on taxpayers and donors to charities.

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