NASDAQ Composite Posts Biggest One-Day Gain in a Year
Energized by consumers and businesses, the U.S. economy grew faster than expected during the third quarter despite two devastating hurricanes that disrupted economic activity in some parts of the country.
On Friday, the Commerce Department reported gross domestic product, the measure of all goods and services produced, increased by 3%. The government report showed that for the first time in three years the economy expanded at a 3 percent or more annual rate – historically, a normal pace for healthy economy – for two straight quarters.
Most impressively, the economy managed to expand at a healthy rate last quarter despite the damage inflicted by Hurricanes Harvey and Irma, which many economists believe reduced the annual growth in the July-September period by at least one-half of 1 percentage point.
The Commerce Department’s report highlighted stronger consumer and business spending during the last quarter as the reasons for the stronger-than-forecast growth. Consumer spending, which makes the biggest contribution to growth, increased by 2.4% after a 3.3% rise in the second quarter. The report went on to say that Nonresidential fixed investment, which reflects business spending on long-term capital, rose while homebuilding subtracted from growth amid a shortage of land and of skilled workers.
Traders should note that Friday’s GDP report is an advance estimate and will be revised two more times before the end of the year.
In other economic news, the Advanced GDP Price Index came in at 2.2%, beating the 1.7% estimate. Revised University of Michigan Consumer Sentiment was 100.7, slightly lower than the 100.8 estimate. Revised University of Michigan Inflation Expectations came in at 2.4%, slightly better than the previously reported 2.3%.
U.S. Equity Indexes
Blowout quarterly earnings from Amazon, Microsoft and Google-parent Alphabet drove the tech-heavy NASDAQ Composite to a record high on Friday. The index rose 2.2 percent while posting its biggest one-day gain since November 2016. The NASDAQ-100 Index also hit a record, rising 2.9 percent.
Forex
The U.S. Dollar Index spiked higher on Friday, continuing the rally which was fueled the previous day by a dovish decision from the European Central Bank.
The Euro, which represents about 57 percent of the dollar index, posted its biggest weekly loss of the year as the ECB’s decision on Thursday to prolong its bond purchases signaled its willingness to maintain an ultra-loose policy stance. It was essentially a dovish-tapering according to traders.
Tensions between Madrid and Catalonia also weighed on the Euro. On Friday, the Catalan parliament declared independence from Madrid in a secret ballot.
The dollar’s gains were limited by concerns that President Trump would appoint Fed Governor Jerome Powell as the next Fed chief. He is viewed as less-hawkish as Stanford University economist John Taylor, another candidate Trump is considering. Other candidates include current Fed Chair Janet Yellen, former Governor Kevin Warsh and White House economic advisor Gary Cohn.
Gold
Despite the weaker U.S. Dollar, gold closed higher on Friday, posting a potentially bullish closing price reversal bottom in response to the Catalonian parliament’s independence declaration from Spain. The political upheaval news drove investors into the safety of gold.
Crude Oil
U.S. West Texas Intermediate and international-benchmark Brent crude oil soared on Friday on speculation the world’s top oil producers would extend the agreement to cut output.
OPEC’s secretary general told Reuters on Friday that Saudi Arabia and Russia were in favor of supporting an extension of the global deal to cut oil supplies for another nine months after the deal expires at the end of March 2018. The plan is designed to trim the global supply and stabilize prices.
In other news, Baker Hughes reported its weekly count of oil rigs operating in U.S. oil fields ticked up by 1 rig to a total of 737.
This article was originally posted on FX Empire
