The fourth quarter GDP growth rate took a big hit this morning when the second estimate fell to an annualized rate of 2.4% from 3.2% on the first read. That was a big drop from the 4.1% in the third quarter and below the 2.5% median forecast of economists. But there was enough other positive economic news so that the Wall Street consensus this morning was still “it’s the cold weather.”
The big U.S. economic number of the week, the second estimate of fourth quarter GDP growth, gets posted tomorrow morning at 8:30. The first estimate put fourth quarter GDP growth at 3.2%. That was a disappointing drop from the 4.1% growth rate in the third quarter. The consensus among economists is that the second estimate will show even slower growth of just 2.6% for the fourth quarter.
Until the S&P 500 can decisively take out the January high near 1850 we remain in a trendless market in my opinion. Lots of action but little in the way of net gains or losses.
This morning’s January jobs number was disappointing. The economy created 113,000 net new jobs against a consensus among economists surveyed by Briefing.com of 175,000. The very, very disappointing December total of 74,000 was revised upward, but only by a tiny 1,000 jobs. And yet the U.S. stock market is up strongly today.
I think tomorrow’s jobs number for January is likely to have a big effect on the markets. But I’m not sure we’ll really learn much of anything about the economy because of uncertainties in the data.
Today’s Purchasing Managers Index for the services sector increased to 54 in January. Some on Wall Street are arguing that the strength in services means that the weakness in manufacturing in January was certainly a result of cold weather.
Today the bad news on the U.S. economy is having way more influence on the markets than the good news—even though the good news is way more credible.
When we checked in with the global economy last week, the numbers had raised questions about growth in developed economies. A pick up in growth in the world’s developed economies is supposed to offset a dip in growth in the developing world in 2014.
Earnings from General Electric this morning illustrate the problem that this kind of decent but not great growth poses for a U.S. market trading near all time highs. General Electric reported a 16% increase in adjusted earnings from continuing operations for the fourth quarter of 2013 over the fourth quarter of 2012. The 53 cents a share the company reported matched Wall Street analyst projections. But the stock fell 2.57%
