Breaking Wall Street Market News & Reports

The U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter, but a strong rebuilding of stocks by businesses and weak spending on capital goods hinted at slower growth in early 2012. U.S. stock index futures retreated Friday, erasing their early gains after the report. U.S. GDP expanded at a 2.8 percent annual rate in the fourth quarter, but the figure was still slightly below expectations for a 3.0 percent gain. An to continue to rumorville, European stocks were earlier buoyed by comments made by European economic affairs chief Ollie Rehn who said a deal on reducing Greece’s private sector debt is imminent and should be completed by the end of January at the latest.

Growth in the fourth quarter got a temporary boost from the rebuilding of business inventories, which was the fastest since the third quarter of 2010, after they declined in the third-quarter for the first time since late 2009. Inventories increased $56.0 billion, adding 1.94 percentage points to GDP growth. Excluding inventories, the economy grew at a tepid 0.8 percent rate, a sharp step-down from the prior period’s 3.2 percent pace. Consumer spending, which accounts for about 70 percent of U.S. economic activity, stepped to a 2 percent rate from the third-quarter’s 1.7 percent pace – largely driven by pent-up demand for motor vehicles. The robust stock accumulation suggest the recovery will lose a step in early 2012. Also pointing to slower growth, business spending on capital goods was the slowest since 2009, a sign the debt crisis in Europe was starting to take its toll. Expectations of soft growth led the Federal Reserve on Wednesday to say it expected to keep interest rates at rock bottom levels at least through late 2014. Fed Chairman Ben Bernanke said the central bank, which forecast growth this year in a 2.2 percent to 2.7 percent range, was mulling further asset purchases to speed up the recovery. The Fed warned the economy still faced big risks, a suggestion the euro zone debt crisis could still hit hard. The Fed is attempting to shield the economy from a potentially more severe recession in Europe. 

About 23.7 million Americans are either out of work or underemployed. The shrinking labor force suggests the economy’s long-term growth potential has slipped below 2.5 percent. A sustained growth pace of at least 3 percent would likely be needed to make noticeable headway in absorbing the unemployed and those who have given up the search for work.

Treasury Remarks

Treasury Secretary Timothy Geithner told the World Economic Forum in Davos the U.S. economy still faced big challenges. “We’re still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the United States”

U.S. Treasury Secretary Timothy Geithner hinted Friday that the Obama administration could support an increase in resources for the International Monetary Fund to fight the euro crisis, and also sounded a note of cautious optimism on the U.S. economy. The U.S. could support an increase in IMF resources, but only if Europe puts more of its own money on the line first, he said in a public question-and-answer session at the World Economic Forum in Davos, Switzerland. Mr. Geithner said he could envision the IMF doing more to support European efforts to contain its debt crisis, “but it cannot substitute” for a lack of commitment from Europe. He said that European governments themselves accept this fact. The IMF is seeking as much as $500 billion in new money for loans in coming years to countries that run into trouble paying their bills or to ease concerns about volatility in the bond markets. Already the IMF is contributing to bailouts for Greece, Ireland and Portugal.

Week of January 30th

MONDAY: Personal income & spending, Dallas Fed mfg survey
TUESDAY: Employment cost index, S&P Case-Shiller home price index, Chicago PMI, consumer confidence, Florida GOP Primary vote; Earnings from ExxonMobil, Eli Lilly, Pfizer, UPS, Amazon.com, Broadcom
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, Fed’s Plosser speaks, ISM mfg index, construction spending, oil inventories, auto sales; Earnings from Aetna, Marathon Oil, Qualcomm, Electronic Arts
THURSDAY: Jobless claims, productivity and costs, Fed’s Fisher speaks, chain-store sales; Earnings from AstraZeneca, Deutsche Bank, Merck, Royal Dutch Shell, Sony, Unilever, beazer Homes
FRIDAY: Employment situation, factory orders, ISM non-mfg index; Earnings from Clorox

Tags: 4th quarter GDP, bernanke, consumption, Fed, Geithner, Greece debt deal, Greece debt restructuring, Greece expects a debt deal this weekend, inflation, inventory buildup, Treasury, US GDP, US GDP growth to slow in 2012

This entry was posted on Friday, January 27th, 2012 at 9:27 am and is filed under Contributors, Debt, Economics, Facebook feed. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.