US markets end higher despite US GDP shrinking for second quarter in a row

29 Jul 2022 Evaluate

The US markets ended higher with gains of over one percent on Thursday, magnifying their previous session’s gains, even after US economic activity unexpectedly saw a continued contraction in the second quarter of 2022, according to a report released by the Commerce Department. The Commerce Department said real gross domestic product decreased by 0.9 percent in the second quarter after slumping by 1.6 percent in the first quarter. Street had expected GDP to increase by 0.5 percent. With GDP unexpectedly declining for the second consecutive quarter, the data signals the U.S. economy is in a technical recession. The drop in GDP in the second quarter reflected decreases in private inventory investment, residential fixed investment, government spending and non-residential fixed investment. The report showed a huge drag from the change in private inventories, which subtracted 2.0 percent from GDP in the quarter. Increases in exports and consumer spending helped limit the downside, although the pace of consumer spending growth continued to slow to 1.0 percent in the second quarter from 1.8 percent in the first quarter.

Meanwhile, after reporting modest increases in first-time claims for US unemployment benefits over the three previous weeks, the Labor Department released a report showing a slight pullback in initial jobless claims in the week ended July 23rd. The report showed initial jobless claims edged down to 256,000, a decrease of 5,000 from the previous week's revised level of 261,000. Street had expected jobless claims to inch up to 253,000 from the 251,000 originally reported for the previous week. On the sectoral front, networking stocks extended the strong upward move seen in the previous session, driving the NYSE Arca Networking Index up by 5 percent to its best closing level in almost three months. Interest rate-sensitive commercial real estate and utilities stocks also moved sharply higher, with the Dow Jones US Real Estate Index and the Dow Jones Utilities Average surging by 3.3 percent and 3.1 percent, respectively.

Dow Jones Industrial Average rose 332.04 points or 1.03 percent to 32,529.63, Nasdaq surged 130.17 points or 1.08 percent to 12,162.59 and S&P 500 was up by 48.82 points or 1.21 percent to 4,072.43.

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