Most US stocks gained after data showed faster-than-expected growth, fueling speculation that the economy is strong enough to withstand the expected higher interest rates.
Visa Inc rallied 9% and MasterCard Inc. gained 7.2% as the two largest payment networks reported results that were higher than expected. Energy shares dipped 1.2% as oil resumed a selloff after US production increased to the highest level since the 1980s.
According to Bloomberg, the Standard & Poor 500 Index increased 0.2% to 1,985.81 in New York after losing as much as 0.4%. The Dow Jones Industrial Average rallied 0.8% or 138.89 points to 17,113.2. Visa is the largest member of the Dow in weighting. The Nasdaq Composite Index and the Russell 2000 Index were little changed.
Robert W. Baird & Co. head of US equity sales, Patrick Spencer said, “The Fed is affecting the mood. They’re basically saying everything is on track for the best case in the economy, but maybe the first interest rate hike will get closer, and that might worry people.”
After the Fed ended its bond-buying program yesterday, the S&P 500 declined 0.1%, indicating that the economy is on a table path to growth.
The Commerce Department reported that the gross domestic product (GDP) rose at a 3.5% annual rate in Q3, above the 3.1% forecast. The Labor Department reported low levels of jobless claims. Investors said that the underlying data cast a pall on the GDP announcement, which said that consumer spending had slowed in Q3.
The Wall Street Journal quoted Alpine Equity Income Fund’s Mark Spellman as having said, “US growth is solid, but I would have thought the consumer would be doing better. Gasoline prices have plummeted, which puts money into consumer’s pockets. They typically spend it, but you’re not seeing a ton of that happening.”
Edward Jones investment strategist, Kate Warne said, “The data says, yes, the economy continued to grow… now people are looking more for what happens in the fourth quarter. In addition to better-than-expected earnings, most companies have continued to provide reasonably optimistic forecasts.”
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