Wall Street was feeling more upbeat Thursday after a government report showed the economy contracted in the third quarter by less than expected and after the Federal Reserve's second interest rate cut in a month. The major stock indexes up more than 2.1%, including the Dow Jones, which rose 190 points.
The Commerce Department reported that the nation's economic output was the weakest since the third quarter of 2001, but it wasn't as bad a showing as Wall Street had feared. The department said the gross domestic product (GDP), the measure of all goods and services produced within the U.S., fell at a 0.3% annual rate in the July-September quarter, rather than 0.5% as expected.
Wall Street had a mixed finish Wednesday after the Fed's decision to lower its fed funds rate by a half-point to 1%. Many investors had hoped the market would build on an 889-point surge in the Dow Jones industrial average on Tuesday. But the buying momentum seemed to reappear Thursday after the GDP report and the Fed's second interest rate cut since Oct. 8.
Michael Strauss, chief economist at Commonfund, said Wall Street was relieved that the GDP figures weren't worse and that, more broadly, investors are drawing some confidence from the government's array of efforts to revive the credit markets as boding well for a weak economy.
"I think it's sort of 'What do you have to do to get someone back from cardiac arrest?' You have to shock them pretty hard and sometimes you have to shock them a couple of times. I think that's what going on here," he said, referring to steps like the Fed's rate cuts and government cash injections in banks, which began this week.
Strauss contends the programs, most of which have yet to take effect, are creating some appetite for snapping up stocks that have been pounded down this month.
Oil Falls on GDP Report
Oil fell more than 2% on Thursday as weak U.S. economic data stirred concerns demand could fall further.
"The GDP numbers made traders rethink whether the economy was going to be strong enough to support oil demand," said Phil Flynn, analyst at Alaron Trading.
U.S. crude settled down $1.54 at $65.96 a barrel, after trading up to $70.60 earlier. London Brent crude settled $1.76 lower at $63.71.
Oil has more than halved its record high of $147.27 from July and is down 30% in October alone, on track for its biggest-ever monthly drop.
U.S. oil demand in August was revised down by 4.8% from the EIA's early estimate of 20.242 million bpd to the agency's final demand number of 19.267 million bpd, and was 8.4% less than demand of 21.035 million bpd a year earlier.
U.S. stocks gained on Thursday, buoyed by hopes that interest rate cuts by global central banks, including the Federal Reserve, will help. The Federal Reserve cut interest rates by half a percentage point on Wednesday, taking its target for overnight bank lending to 1% to help the economy.
China also cut interest rates on Wednesday, kicking off what is expected to be a global round of rate cuts. Norway, Taiwan and Hong Kong have also cut rates.
The Fed cut pushed the dollar lower on Wednesday, making dollar-priced commodities like oil cheaper and more attractive for holders of other currencies. But the dollar rose on Thursday amid month-end book squaring by investors.
Oil drew some support from OPEC's decision last week to cut output by 1.5 million barrels per day, or about 5%, to prop up prices and hints that it might further reduce supply.
Nigeria's state oil company said in a statement it would reduce crude oil export volumes by 5% in November and December because of the OPEC cutback.
Members of the cartel have said they could cut output again to support prices.
Venezuelan Oil Minister Rafael Ramirez said on Thursday OPEC should cut oil output by 1 million barrels per day -- possibly before its next scheduled meeting in December -- and should set a minimum price target of $70 or $80 a barrel.
Venezuela's socialist President Hugo Chavez has used high oil prices to finance lavish social spending. Chavez hawkishly backs output cuts to support oil but says analysts and opponents are wrong to assert that at current price levels he will have to cut social projects.
Sources: Yahoo, Reuters
The Commerce Department reported that the nation's economic output was the weakest since the third quarter of 2001, but it wasn't as bad a showing as Wall Street had feared. The department said the gross domestic product (GDP), the measure of all goods and services produced within the U.S., fell at a 0.3% annual rate in the July-September quarter, rather than 0.5% as expected.
Wall Street had a mixed finish Wednesday after the Fed's decision to lower its fed funds rate by a half-point to 1%. Many investors had hoped the market would build on an 889-point surge in the Dow Jones industrial average on Tuesday. But the buying momentum seemed to reappear Thursday after the GDP report and the Fed's second interest rate cut since Oct. 8.
Michael Strauss, chief economist at Commonfund, said Wall Street was relieved that the GDP figures weren't worse and that, more broadly, investors are drawing some confidence from the government's array of efforts to revive the credit markets as boding well for a weak economy.
"I think it's sort of 'What do you have to do to get someone back from cardiac arrest?' You have to shock them pretty hard and sometimes you have to shock them a couple of times. I think that's what going on here," he said, referring to steps like the Fed's rate cuts and government cash injections in banks, which began this week.
Strauss contends the programs, most of which have yet to take effect, are creating some appetite for snapping up stocks that have been pounded down this month.
Oil Falls on GDP Report
Oil fell more than 2% on Thursday as weak U.S. economic data stirred concerns demand could fall further.
"The GDP numbers made traders rethink whether the economy was going to be strong enough to support oil demand," said Phil Flynn, analyst at Alaron Trading.
U.S. crude settled down $1.54 at $65.96 a barrel, after trading up to $70.60 earlier. London Brent crude settled $1.76 lower at $63.71.
Oil has more than halved its record high of $147.27 from July and is down 30% in October alone, on track for its biggest-ever monthly drop.
U.S. oil demand in August was revised down by 4.8% from the EIA's early estimate of 20.242 million bpd to the agency's final demand number of 19.267 million bpd, and was 8.4% less than demand of 21.035 million bpd a year earlier.
U.S. stocks gained on Thursday, buoyed by hopes that interest rate cuts by global central banks, including the Federal Reserve, will help. The Federal Reserve cut interest rates by half a percentage point on Wednesday, taking its target for overnight bank lending to 1% to help the economy.
China also cut interest rates on Wednesday, kicking off what is expected to be a global round of rate cuts. Norway, Taiwan and Hong Kong have also cut rates.
The Fed cut pushed the dollar lower on Wednesday, making dollar-priced commodities like oil cheaper and more attractive for holders of other currencies. But the dollar rose on Thursday amid month-end book squaring by investors.
Oil drew some support from OPEC's decision last week to cut output by 1.5 million barrels per day, or about 5%, to prop up prices and hints that it might further reduce supply.
Nigeria's state oil company said in a statement it would reduce crude oil export volumes by 5% in November and December because of the OPEC cutback.
Members of the cartel have said they could cut output again to support prices.
Venezuelan Oil Minister Rafael Ramirez said on Thursday OPEC should cut oil output by 1 million barrels per day -- possibly before its next scheduled meeting in December -- and should set a minimum price target of $70 or $80 a barrel.
Venezuela's socialist President Hugo Chavez has used high oil prices to finance lavish social spending. Chavez hawkishly backs output cuts to support oil but says analysts and opponents are wrong to assert that at current price levels he will have to cut social projects.
Sources: Yahoo, Reuters
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