Sunday 1 August 2004

US stocks up despite weaker-than-expected GDP

Stocks in the US rose on Friday, despite the fact that GDP grew only 3 percent in the second quarter, much lower than expected.

The S&P 500 rose 1.29 points or 0.1 percent to 1,101.72. The Dow Jones Industrial Average rose 10.47 points or 0.1 percent to 10,139.71. The Nasdaq Composite Index was up 6.30 points or 0.3 percent to 1,887.36.

For the week, the S&P 500 gained 1.4 percent, the Dow added 1.8 percent while the Nasdaq jumped 2.1 percent.

Analysts attributed the good showing to strong corporate profits. Of the 406 companies in the S&P 500 that have reported second quarter results so far, profits surged an average 28.2 percent.

Reports on Friday also suggest that while the US economy may be slowing down, there is still considerable strength in it.

The National Association of Purchasing Management-Chicago reported that its index of manufacturing activity rose to 64.7 in July from 56.4 the previous month. The University of Michigan's index of consumer sentiment rose to 96.7 in July, the highest since January.

Many economists have been warning of an impending slowdown in the US economy, so it has largely been discounted in financial markets.

If the economy proves more resilient than expected, we may yet see a strong run-up in stock prices in the second half of the year.

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