Today the second estimate of U.S. GDP growth came in slightly below projections. But that lower than expected growth rate sent Treasury prices up—and yields down—in today’s auction. That in turn has been good for U.S. stocks, as it has reduced anxieties about any early tapering off of the Federal Reserve’s monthly purchase of $85 billion in Treasuries and mortgage-backed securities.
The jobs report for April wasn’t as bad as feared. The U.S. economy added 165,000 jobs in April. Economists surveyed by Bloomberg had expected to see 140,000 new jobs. But most of the jobs created were part time, leading to a fall in aggregate wages for the month–and that isn’t good news for consumer spending in the second quarter.
Monday’s optimism about U.S. and global economic growth has shifted to worry today. I think this shift has more to do with Friday’s U.S. jobs report than with any recently released data that convincingly argues for a significant change in economic growth.
The week has begun with optimism that the housing recovery and consumer spending will continue to support decent U.S. economic growth. The week, however, ends with the Thursday, May 2, meeting of the European Central Bank and Friday’s report on U.S. employment growth. I wouldn’t be surprised to see stocks pause in midweek
The first read on U.S. first quarter GDP growth wasn’t terrible—2.5% growth. That was a significant improvement from the 0.4% annual growth posted in the fourth quarter of 2012, although it did trail economist expectations of 2.8% to 3% growth. The problem is that if you dig down a level or two, the trends in the data point to a significant slowdown in the second quarter.
For a stock market worried about growth, earnings from IBM (IBM), Microsoft (MSFT), and Google (GOOG) reported after the close of the New York market today, Thursday, April 18, were NOT good news.
U.S. payrolls grew by just 88,000 workers in March, the Labor Department reported this morning. That was the smallest gain in nine months.
