U.S. Growth Revised Up to 3%, Stocks Struggle

Nichole Harper
29 Feb, 2012
New York City

U.S. stocks got lift after the estimate of economic growth in the fourth quarter was revised higher. Fed Chairman Bernanke said job market is far from normal despite the recent drop in unemployment rate and said pace of economic recovery is modest and uneven.

12:20 PM New York – U.S. stocks got lift after the estimate of economic growth in the fourth quarter was revised higher. Fed Chairman Bernanke said job market is far from normal despite the recent drop in unemployment rate and said pace of economic recovery is modest and uneven.[/R]

Stocks in New York traded higher after U.S. economic growth was revised higher and the central bank in Europe offered a second round of cheap loans to banks.

The Commerce Department revised up its estimate fourth quarter economic growth to 3% from its previous reading of 2.8%.

The latest estimate lowered the increase in inventories to $54.3 billion from $56 billion and the build up is not likely to continue in the current quarter.

The revised estimate raised commercial construction growth to 2.8% from 1.7% and consumer spending to 2.1% from 2%.

The best indicator of domestic economic activity, real final sales increased 1.1% compared to previous estimate of 0.9% increase and investment in homes and apartments were revised higher to 11.5% increase.

Exports growth was tempered to 4.3% from the previous estimate of 4.7% and import increase was lowered to 3.8% from the earlier read of 4.4%.

Government spending at all branches and levels was revised to a decline of 4.4% from compared to 4.6% fall in the earlier estimate.

ECB Offers More Cheap Cash

European markets were calm after the European Central Bank loan program attracted strong demand for extended loans and Greece raced to approve more austerity measures to meet conditions laid out by international lenders.

The European Central Bank’s extended loan program attracted demand for €529 billion from 800 banks. The second funding operation in as many months increased the total liquidity in the financial system above €1 trillion that eased pressure on the sovereign bond rates.

The second installment of the extended loan operation, called Long Term Repo Operation, is not expected to be followed by third round as the first two rounds have removed much of the market anxiety for now.

Stock Movers

First Solar, Inc ((FSLR)) dropped 10% to $32.65 after the solar modules maker reported a loss in the fourth quarter and lowered its 2012 sales outlook but retained its earnings per share forecast.

Universal Display Corp ((PANL)) fell 7.5% to $42.24 after the company lowered its fiscal 2012 outlook but reported revenues and earnings ahead of market expectations.

Liz Claiborne, Inc ((LIZ)) fell 62 cents or 6% to $9.77 after it swung to a profit in the final quarter and reaffirmed its adjusted operating earnings estimate between $125 million and $140 million.

Central European Distributions Corp ((CEDC)) plunged 18% to $4.43 after it reported wider loss in the fourth quarter from a year ago and net sales were below analyst projections.

Vocus, Inc plunged 38% to $13.99 after the maker of software for marketing and public relations agreed to acquire privately held iContact for $169 million in cash and stock.