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Global Economic Growth Pushes the Dow Higher

By Matt Thalman - Sep 9, 2013 at 1:13PM

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Despite continuing concerns about Syria, the U.S. markets react positively to surprising economic growth from the world.

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.

Heading into this morning's session, many investors likely feared that the market would be driven by news from around the world. And while that is the case, it's not that bad global news that's moving U.S. markets; the Syrian conflict hasn't really had any impact on the markets today, and the three major U.S. indexes are all forging higher. As of 12:45 p.m. EDT the Dow Jones Industrial Average (^DJI -0.11%) is up 110 points, or 0.8%, to break through the 15,000 mark once again. The S&P 500 is up 0.69%, while the Nasdaq leads the way with a 0.9% gain.

A revised Japanese GDP figure and economic data from China indicating that its exports grew 7.2% in August have given U.S. investors confidence today. The Chinese exports number is a sign that the country's economy may not be flagging as much as many had believed. The country is experiencing slower GDP growth than in years past, but it is growing nonetheless, as today's report reinforces. As for Japan, the initial second-quarter GDP report indicated growth of 2.6%, but today's revised number of 3.8% means the world's third-largest economy is also doing much better than previously expected. 

Within the Dow, the biggest loser at this time is Verizon (VZ 0.57%), which has fallen 0.9%. Investors are still considering how the Vodafone buyout will affect the long-term prospects of Verizon's business and how this deal will surely affect the company's ability to grow in the coming years. Back in June the company had proposed a $700 million offer to buy a small Canadian telecom company, but just last week, after the Vodafone deal was announced, the expansion into the North was canceled. The move into Canada would have been a great way for Verizon to expand its user base in an new country that would be easy to manage. But now that the Vodafone deal is going to pile a ton of debt onto Verizon, expansion opportunities will become less of an option until some of the debt is cleaned up. 

Although the Dow's two banks are performing well today -- JPMorgan Chase (JPM 0.92%) is up 0.2%, and Bank of America (BAC 0.75%) has gained 0.6% -- their close competitor Wells Fargo (NYSE: WFC) expects to see a big decline in the number of mortgages its makes this quarter, which will likely hurt all three companies. Wells Fargo chief financial officer Tim Sloan spoke at a conference this morning, saying he believes the bank will make 30% fewer home loans this quarter than last. During the second quarter of 2013, Wells Fargo wrote $112 billion in loans, and it expects to write only $80 billion during the current period. The decline is expected to come as a result of higher interest rates. Because Wells made more than one in every five home loans in the second quarter and JPMorgan Chase and Bank of America have both made it clear they want to get more involved in mortgage banking and shrink other units of their businesses, this massive drop in loans will likely have an effect on both of the Dow components. 

Fool contributor Matt Thalman owns shares of Bank of America and JPMorgan Chase. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513

The Motley Fool recommends Bank of America, Vodafone Group, and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. 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.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,795.91 (-0.11%) $-36.63
Bank of America Corporation Stock Quote
Bank of America Corporation
$33.74 (0.75%) $0.25
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$115.40 (0.92%) $1.05
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$44.80 (0.57%) $0.26
Vodafone Group Plc Stock Quote
Vodafone Group Plc
$122.28 (1.04%) $1.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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