Saturday, July 28, 2012

Wall Street rises on GDP, stimulus hopes

NEW YORK (Reuters) - Wall Street rose on Friday following a report on U.S. economic growth which met expectations and on hopes for further stimulus from the Federal Reserve and the European Central Bank.

U.S. economic growth slowed, as expected, in the second quarter as consumers spent at their most sluggish pace in a year. The figure was better than investors' worse fears but still weak enough to potentially push the Fed closer to pumping more money into the economy.

"The Fed's concern and mandate is employment. Annualized GDP growth at 1.5 percent cannot begin to mend the unemployment picture," said Joseph Trevisani, chief market strategist at Worldwide markets in Woodcliff Lake, New Jersey.

Fed Chairman Ben Bernanke and other policymakers "will have all the rationale they need to open the liquidity spigot."

Stocks leapt nearly 2 percent on Thursday, erasing much of the losses for the week, as ECB chief Mario Draghi said he would do whatever it takes to save the euro. That followed a story in the Wall Street Journal on Wednesday, which was seen as heralding a new round of stimulus from the Fed.

Facebook Inc shares tumbled 14 percent, hitting an all time low of $23.02 after it reported a drastic slowdown in revenue growth on Thursday and failed to offer financial forecasts that quelled fears about its ability to boost advertising growth.

The Dow Jones industrial average <.dji> gained 182.40 points, or 1.44 percent, to 12,858.45. The Standard & Poor's 500 Index <.spx> added 16.36 points, or 1.22 percent, to 1,354.25. The Nasdaq Composite Index <.ixic> added 46.66 points, or 1.63 percent, to 2,900.90.

Merck & Co was the top boost to the Dow after it reported better-than-expected quarterly earnings despite the negative impact of the stronger dollar, with strong sales growth of its vaccines and treatments for diabetes and HIV. The shares rose 2.7 percent to $44.44.

Optimism over further stimulus measures has helped offset a mixed U.S. corporate earnings season, with many companies beating profit forecasts but often missing revenue projections and warning about sluggish global growth.

As of Thursday, about half of S&P 500 companies have reported earnings. Of those, about two thirds have beat profit forecasts. Three in five, however, have missed Wall Street's revenue projections, according to Thomson Reuters data.

Starbucks Corp cut its outlook for the current quarter, citing global economic weakness and a recent slowdown in visits in the United States, its biggest market for sales and profits, sending shares tumbling more than 10 percent to $46.85.

Gross domestic product expanded at a 1.5 percent annual rate between April and June, the weakest pace of growth since the third quarter of 2011, the Commerce Department said on Friday. (Reporting by Edward Krudy; Editing by Kenneth Barry)


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