Wednesday, June 26, 2013
Stocks rise even as US economic growth slows
NEW YORK (AP) — U.S. stock indexes moved higher in early trading today, despite news that the U.S. economy has been growing more slowly than first estimated.
In early trading, the Dow Jones industrial average was up 116 points, or 0.8 percent, to 14,879. The Standard & Poor’s 500 was up 14, or 0.9 percent, to 1,602.
The gains were broad. All 10 industry sectors in the S&P 500 were up, led by health care and bank stocks.
The government reported today that the U.S. economy grew at an annual rate of 1.8 percent in the first three months of the year, significantly lower than the previous estimate of 2.4 percent. The Commerce Department said that consumers spent less than previously estimated, a troubling development in a country where consumer spending makes up more than 70 percent of the economy.
Investors, however, might have been pushing the market higher because they decided that they pushed it too low last week, a sentiment that investors credited for Tuesday’s stock gains. Or they may have decided that the slower-growing economy will influence the Federal Reserve to delay any plans to pull back on stimulus measures. Those measures, which include buying bonds to push investors into stocks, and keeping interest rates low to spur borrowing, are meant to prop up the economy.
Fed Chairman Ben Bernanke set off a stock market plunge a week ago when he said the Fed could rein in the bond-buying program starting as early as this year. It wasn’t that investors were surprised that the Fed will pull back on its stimulus programs: Most everyone expects that to happen eventually. It was more that they were worried that the Fed might pull out too soon, before the stock market could stand on its own without the Fed propping it up.