U.S. Market Averages Traded Higher After Latest GDP Report Indicates Resilient Economy

Barry Adams
27 Jul, 2023
New York City

Market averages traded higher after the latest GDP and durable goods data showed resilient economy and weakening inflation forces. 

The U.S. economy expanded at 2.4% in the second quarter, faster than 2.0% in the first quarter, the Bureau of Economic Analysis reported Thursday. 

The worries of economic recession were set aside after GDP expanded for the third quarter in a row after shrinking for two quarters in a row in 2022. 

The growth accelerated after nonresidential fixed investment accelerated to 7.7% from 0.6% but consumer spending slowed sharply to 1.6% from 4.2% 

Goods consumption growth slowed sharply to 0.7% from 6.0% but spending on services, remained healthy, slowed to 2.1% from 3.2% in the previous quarter,  

GDP report also showed price pressures are easing and the personal consumption expenditures price index slowed to annual rate of 2.6% from 4.2% in the previous quarter. 

Durable goods orders rose 4.7% in June from the previous month, the fastest pace of increase since July 2020, the U.S. Census Bureau reported Thursday. 

New orders for durable goods for May were revised higher to an increase of 2.0%. 

Orders rose for the fourth month in a row and transportation orders soared 12.1% after non-defense aircraft and parts orders jumped 69.4%.   

Orders excluding transportation rose 0.6%, excluding defense jumped 6..2%. 

Orders for non-defense capital goods excluding aircraft, a closely watched barometer for business spending plans, increased 0.2% after a downwardly revised 0.5% in May.  

Two economic reports provided yet another signal that the U.S economy is resilient, despite multiple rate hikes. 

Rates have risen by 500 basis points and the U.S. economy is still growing at above 2% annual rate, supporting the case that the Fed has more flexibility in pausing rates and may be able to cool inflation further without dipping the economy into a recession. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.2% to 4,568.26 and the Nasdaq Composite fell 0.1% to 14,101.27. 

The Dow Jones Industrial Average extended its winning streak to 14th day, the longest rally since 1897, 126 years ago. 

The yield on 2-year Treasury notes decreased to 4.86%, 10-year Treasury notes inched lower to 3.86% and 30-year Treasury bonds edged down to 3.91%. 

Crude oil decreased $0.79 to $78.80 a barrel and natural gas prices decreased 8 cents to $2.64 a thermal unit. 

 

U.S. Stock Movers 

Meta Platforms Inc jumped 6.8% to $319.08 after the company reported better-than-expected earnings on the back of strong advertising revenue. 

Chipotle Mexican Grill, Inc plunged 9.0% to $1,900 after the fast-casual food chain operator reported mixed quarterly results. 

total revenue increased 13.6% to $2.5 billion and comparable store sales rose 7.4%. 

Net income in the quarter jumped to $341.8 million from $259.9 million and diluted earnings per share jumped to $12.32 from $9.25 a year ago. 

Chipotle guided third quarter comparable restaurant sales to increase in the low to mid-single digit and full-year sales are expected to increase in mid to high-single digit. 

The company plans to open between 255 and 285 stores, including between 10 to 15 relocations to add drive throughs, depending on construction, utility and permit delays.   

McDonald's Corp increased 1.8% to $296.94 after the burger chain reported better-than-expected revenue and adjusted earnings. 

Global same store sales increased 11.7% and the U.S. comparable store sales rose 10.3% compared to 3.7% a year ago because of promotional meals celebrating the 52nd birthday of McDonald's character Grimace.