U.S. stocks have opened a little higher this morning as investors wait for the 2 p.m. EDT release of the policy statement from the FOMC's July meeting. The S&P 500 (SNPINDEX:^GSPC) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES:^DJI) up 0.3% each at 10 a.m. EDT.
The U.S. "beats" on GDP and employment
The Bureau of Economic Analysis published its first estimate for second-quarter GDP this morning, and at 1.7% annualized growth, it looks encouraging relative to a consensus forecast of 1%. But what the BEA gave with one hand, it took away with the other, as the statistical agency revised Q1 GDP growth from 1.7% down to 1.1%. (The magnitude of that change isn't unusual: The average revision, in absolute value, between the advance and second estimates between 1983 and 2009 was 0.5%.)
Finally, note that the BEA has just completed a comprehensive revision of the way in which it tallies the income and product accounts that feed into the GDP calculation. These revisions take place every five years, on average, and today's estimates reflect the results of that process. According to the Financial Times, the changes "will add the equivalent of a country the size of Belgium to output in the world's largest economy," or roughly a 3% increase. Today's data reflects these changes, which have also been applied to past data in order to allow for consistent comparisons.
Yet more positive data this morning: Payroll processor Automatic Data Processing reported that U.S. companies added 200,000 workers to their payrolls in July. That compared favorably with the median forecast of 180,000 in a Bloomberg poll of 40 economists. ADP also lifted its estimate for June from 188,000 to 198,000. On Friday the Bureau of Labor Statistics will release its own July employment report.
Unsurprisingly, in the face of this data, both the SPDR Gold Shares ETF (NYSEMKT:GLD) and the iShares Barclays 20+ Treasury Bond Fund (NYSEMKT:TLT) are lower this morning. Why? Because (relatively) strong economic performance bolsters the Fed's case for tapering its $85 billion-per-month bond purchases, a.k.a. "quantitative easing," later this year before ending them entirely next year -- the first step on the path to a normalization of interest rates.
However, don't expect a victory lap from the Fed in this afternoon's policy statement: The central bank's position and language will remain extremely circumspect. Expect instead to see the Fed reiterate that the decision to taper, as well as the speed of the tapering, depends on the state of the economic recovery as borne out in the data. Remember, today's economic figures are subject to revision -- upward or downward.
Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.