News at a Glance
Upon Further Review: Q2 GDP growth revised up to 3.3%.
Unemployment Dips: Weekly claims down to 425k, match consensus.
Rally Continues: Stocks rise on data, extending Wed. gains.
Oil Drops: Crude prices decline on potential use of SPR.
The Lowdown
Lower energy prices and a sharp upward revision to the gross domestic product lifted the major indexes to big gains for the second straight day.
Stocks surged ahead Thursday after growth of the second-quarter GDP was revised up to nearly twice the prior estimate. The Dow Jones Industrial Average rose 213 points to 11715. The Nasdaq picked up 29 at 2412, and the S&P 500 climbed 19 to 1301.
The gains were widespread, as nearly every major sector finished the day higher. Financials led the market. Consumer cyclicals, capital goods and telecoms also showed strength. Energy stocks were the exception, falling as the price of oil declined.
The GDP grew 3.3% during the last quarter, according to the preliminary estimate released today by the Commerce Department. That was well above the prior estimate of 1.9% and easily exceeded economists' projections.
Economists have struggled to handicap what effect the credit crisis would have on economic growth. Recent indicators suggest the manufacturing sector and the consumer have held up well, despite slumping corporate profits and a jump in energy prices. The latest GDP revision suggests economists may have been underestimating the nation's resiliance.
Another encouraging sign: the chain deflator, a common measure of inflation often used by the Federal Reserve, was revised up just 0.1% to a second quarter reading of 1.2%, a small uptick given the big change to the GDP.
Meanwhile, the labor market remains under pressure. Jobless claims came in above 400,000 again last week, though they did decline a bit from the prior week.
In energy, Hurricane Gustav threatened to disrupt offshore production facilities in the Gulf of Mexico, however oil prices declined on speculation (well, reverse-speculation) that the government would tap the Strategic Petroleum Reserve. By 3:38 p.m., crude traded down $2.64 on the day at $115.51 a barrel.
The rally extended a strong week for stocks. The Dow has gained 329 points, or 2.8%, over the last three sessions.
Corporate News
Sears (SHLD) posted a 62% decline in second-quarter profit as sales declined during an overhaul of the company. Sears earned $65 million, or 50 cents a share, down from $173 million, or $1.15 a share, in the year-ago period, the retailer said. Sears is in the middle of tweaking how the firm relates to its customers and replacing several executives, including the interim chief.
Toyota (TM) trimmed its global sales guidance for next year. The automaker now expects to sell 9.7 million vehicles in 2009, down from a prior estimate of 10.4 million vehicles. That marked the second downward revision in as many months. The trend suggests Toyota has fallen to the same market pressure plaguing Ford (F) and General Motors (GM). Namely, in the midst of an economic slowdown, fewer people want to buy new cars.
Fannie Mae (FNM) followed in the tradition of restaffing its top-level offices after its share price tanked. This is not unlike the tradition of replacing a coaching staff after a 1-15 season. Fannie announced the departure of three high-level executives, including chief financial officer Stephen Swad. He will be replaced by David C. Hisey.
The Economy
Growth of the gross domestic product was revised to a preliminary second-quarter reading of 3.3%, up sharply from a previous estimate of 1.9%, the Commerce Department said. Economists had expected GDP growth for the quarter to be revised up to 2.7%. Meanwhile, the chain deflator, a measure of inflation, was revised up slightly to 1.2%, up from a prior estimate of 1.1%. Economists had expected no change. REPORT
Initial jobless claims fell to 425,000 last week, down from a revised 435,000 in the prior week, the Labor Department said. The drop was in line with economists' estimates. REPORT
ReadMe
BusinessWeek on rule changes at the SEC: Look! A non-boring story about accounting! These are more rare than non-boring stories about state income taxes and rare still than mildly interesting stories about the two-year note. Make a wish! STORY
Forbes on women: The magazine releases its annual ranking of the 100 most powerful women in the world. Bonus fact (1): One of the editors of this compilation was Michael Noer, the author of the 2006 Forbes article, "Don't Marry Career Women." Bonus fact (2): The five most powerful women in the world as ranked by Forbes in 2008 are married. STORY
The Washington Post on the credit crunch: As small banks feel the sting of bad loans, they are tightening their lending standards and leaving some small businesses in the cold. STORY
WatchMe
Bloomberg on airlines: Higher energy prices and fewer passengers have taken their toll on airline stocks. VIDEO
CNBC on Asia: Robert Howe, chief executive officer at Geomatrix, makes the case for long-term investments in the East. VIDEO
Coverage of the Democratic National Convention: Sen. Barack Obama (D-Ill.) accepts the party's nomination at Denver's Invesco Field. (The Broncos wrap up the NFL preseason Friday night in Sen. John McCain's great state of Arizona.) CNN, CSPAN, MSNBC, PBS, 8 p.m.
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