Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Today's Upside Surprise Paves the Way for More Volatility

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.

Despite the uncertainty hanging over the market linked to the situation in Syria and the possibility of a U.S.-led military strike, U.S. stocks opened little changed today, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.3% and 0.2%, respectively, as of 10:10 a.m. EDT.

After a recent spate of downbeat economic indicators, today's revision in the second-quarter GDP data comes as a pleasant surprise. According to the latest estimates published by the Department of Commerce, the economy grew at a 2.5% annualized rate during the three months to June 30 -- a substantial improvement over the initial 1.7% estimate. The new estimate was also higher than the 2.2% consensus forecast in a Reuters poll of economists.

Where did the improvement come from? New trade data showed that exports grew at the fastest rate in more than two years, despite the fact that the trade-weighted U.S. dollar index strengthened during the second quarter. Retailers also added to their inventories at a faster clip.

Using the new estimate, the U.S. economy grew at an annualized rate of roughly 1.7% in the first half of the year. According to the Federal Reserve's latest published estimates, which were released at the conclusion of the June Federal Open Market Committee meeting, Chairman Ben Bernanke and his colleagues expect full-year growth in a range of 2.3% to 2.6% for 2013.

In order for the economy to achieve even the lower bound of that range, it would need to grow at an average rate near 2.9% (annualized). Clearly, this would imply a pickup in growth, even from last quarter's level. That looks like a bit of a reach to me, but far from impossible; after all, GDP grew 2.8% in the second half of 2010.

Today's upward growth revision may raise the likelihood that the Fed will begin to scale back its $85 billion-per-month bond purchases next month, even if, to this observer, that would seem to be odd timing, given that next month will already be saddled with considerable uncertainty linked to political squabbles over government funding and the federal debt limit. Either way, I'm expecting a volatile September. Investors would do well to steel themselves for that possibility and remain focused on valuations and long-term investing goals.

Here's another wild card in the economic equation: oil. This week, French bank Societe Generale said that oil could go to $150 per barrel if the Syrian conflict impacts the Middle East oil supply. That would be awful for the economy, but for investors who are positioned to profit from $100-plus oil, there would certainly be a silver lining. To help investors get rich off of rising oil prices, our top analysts prepared a free report that reveals three stocks that are bound to soar as oil prices climb higher. To discover the identities of these stocks instantly, access your free report by clicking here now.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 29, 2013, at 4:14 PM, RickytimeRic wrote:

    Phony economy, phony stock market. Enjoy the ride, but get ready to bail out. All the new jobs at my work place are part time with no benefits. Hard to create a strong economy on part time jobs. Triple the minimum wage and than you have a workable wage and people spending.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2615364, ~/Articles/ArticleHandler.aspx, 9/26/2016 8:37:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:35 PM
^DJI $18094.83 Down -166.62 -0.91%
^GSPC $2146.10 Down -18.59 -0.86%
S&P 500 INDEX CAPS Rating: No stars