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Three Cheers for the GDP - Money Matters for 10/28/05 Don Bravo | 10/28/05
Wall Street received some encouraging news courtesy of the Bureau of Economic Analysis, U.S. Department of Commerce. The economy geeks over there somehow pounded their calculator keyboards until their fingers were sore and came up with an annual growth rate for the third quarter of 3.8%.
Investors went on a shopping spree, fueled even more in the afternoon when it was assured that the only official to be indicted by Special Prosecutor Patrick Fitzgerald was I. Lewis (Scooter) Libby, the Vice President's Chief of Staff, who immediately resigned. I suppose had Fitzgerald indicted Libby and Rove, the Dow may have only been up 100 points, if they had indicted the VP, it would have closed lower.
As it was, the Dow racked up an impressive 172-point gain, though, as we have seen over the past two weeks, that may turn out to be meaningless. Any chartist worth his or her salt will gladly point out that the Dow and other US indices have been in persistent pattern of big gains and big losses, alternating nearly every trading session.
Also, these kinds of patterns are not unusual and follow a pattern of decreasing amplitude (the highs and lows become less extreme) before some actual direction is established, and that has yet to happen.
Investors had a spate of good news today, both on the economic and political fronts, but, cheering that there was only one indictment, is more or less like cheering because your favorite football team only lost by a field goal and covered the point spread. It's a victory of sorts, but they're not making any headway toward the Super Bowl.
It's somewhat the same with the GDP number. These things are routinely massaged and revised, and, in the case of GDP, this is only a preliminary figure and will be revised not once, but twice over the next 60 days.
Nevertheless, Wall Street ended the week on a cheery note. The kinds of swings we've seen of late suggest that it was more of a one-day move rather than a long-term trend. The economy and the nation as a whole has a raft of problems to sort out, but Wall Street likes to have a party every now and then, and just about any good news brings out the buyers these days.
Today was certainly one of those days.
Dow Jones: +172.82; 10,402.77 close
NYSE Advancers: 2383
Nasdaq Advancers: 2020
NYSE New Highs: 53
Nasdaq New Highs: 53
Gold: -0.80; 474.80 close
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