US stocks jump on GDP surprise

Another day of positive economic data on Thursday brought another day of gains for US stocks. Bloomberg reports:

U.S. stocks climbed the most in three weeks, led by manufacturers and financial companies, after growth in exports helped the economy expand faster than estimated in the second quarter...

The S&P 500 gained 19.02 points, or 1.5 percent, to 1,300.68, capping its biggest three-day advance in a month. The Dow Jones Industrial Average increased 212.67, or 1.9 percent, to 11,715.18. The Nasdaq Composite Index added 29.18 to 2,411.64. More than five stocks rose for each that fell on the New York Stock Exchange.

However, economists were less enthused over the GDP report. Again from Bloomberg:

Gross domestic product increased at a 3.3 percent annual pace, compared with the initial estimate of 1.9 percent, the Commerce Department said today in Washington. Trade contributed the most to U.S. growth in almost three decades...

"Outside of trade, the economy is considerably weaker," said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. "When you look at the spending, it looks terrible for the second half of the year."...

Today's GDP report is "kind of the last hurrah" for the U.S. economy, Martin Regalia, chief economist for the U.S. Chamber of Commerce, said at a press conference today. "We've begun the process of slipping into a good old-fashioned recession."

There may be good reasons for the pessimism.

The Labor Department said initial jobless claims dropped to 425,000 last week, matching economists' forecasts, from 435,000 the previous week. The level remains well above the 321,000 average of last year. The number of people staying on unemployment rolls rose to 3.423 million, the highest since November 2003...

Today's report also included a first look at corporate profits for the second quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, decreased 2.4 percent to an annual rate of $1.56 trillion. Earnings were down 7 percent from the same time last year, the biggest decrease since the 2001 recession.