Great News! GDP's in the Pits
Jun 26th 2013 10:00PM
Updated Jun 26th 2013 10:02PM
Markets jumped today in response to a surprising downward revision in Q1 GDP from 2.4% to 1.8%, with the Dow Jones Industrial Average gaining 150 points, or 1%, as a result. You read that right. In the backwards logic of the current financial zeitgeist, bad economic news is being construed as advantageous for stocks, as traders believe it will help dissuade the Federal Reserve from tapering its bond-buying program.
Long-term investors should be aware that rallies such as today's are purely trader-driven. While it may be reasonable that negative data would influence the Fed, the best outcome for long-term investors would be to see strong GDP and job growth, as an economy returning to full health is the best medicine for stocks.
On an up day on the market and a session where only three blue chips fell, Alcoa was actually the Dow's biggest mover, falling 2.2% as metal prices continue to decline. Gold has a hit a three-year low amid uncertainty from central banks around the world, and base metals have also declined recently on the Chinese credit crisis, since China is a major buyer of commodity metals. Alcoa has been the Dow's worst performer this year, as its dependence on aluminum prices has prevented it from taking advantage of the overall bull market.
Back on the plus side, Boeing gained 2.1% on a couple of items. First, the aircraft maker said it will lease additional 717 jets to QantasLink and Volotea, a small European carrier, later this year. Boeing also made its first 787 Dreamliner delivery to British Airways, with the long-haul carrier having 23 more on order. The delivery is a reminder that the aerospace giant could see significant sales growth from the new composite jet now that it's put the battery-fire issues behind it.
Another big mover was Home Depot , gaining 2.1%. There was no specific news surrounding the home-improvement retailer, but investors were likely pleased to see Treasury yields falling for the first time in eight sessions, easing concerns about rising mortgage rates, which could affect the housing recovery and, consequently, the housing-focused retailer. Shares may have also gotten a boost by reports yesterday that showed new-home sales increasing faster than expected, and a 12.1% increase in home prices in April, also topping projections.
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The article Great News! GDP's in the Pits originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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