U.S. stocks overcame some early weakness to finish the regular trading session slightly higher as market participants welcomed a surprising upward revision to Q2 GDP, while Fed rate hike expectations remained elevated and yesterday’s GOP tax reform proposal found focus. The U.S. dollar pared its recent run and Treasury yields finished mixed. Crude oil registered lower after a midday reversal and gold was higher. In equity news, BlackBerry and Rite Aid announced quarterly results and Abbot Labs received a boost after the FDA approved its diabetes device.

The Dow Jones Industrial Average (DJIA) increased 40 points (0.2%) to 22,381, the S&P 500 Index was 3 points (0.1%) higher at 2,510, and the NASDAQ Composite was nearly unchanged at 6,453. In moderate volume, 766 million shares were traded on the NYSE and 1.8 billion shares changed hands on the NASDAQ. WTI crude oil declined $0.58 to $51.56 per barrel and wholesale gasoline was $0.01 lower at $1.61 per gallon. Elsewhere, the Bloomberg gold spot price added $4.18 to $1,286.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 93.17.

The final look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of growth of 3.1%, adjusted up from the 3.0% expansion posted in the first revision, where it was expected to remain. Q1 GDP expanded by an unrevised 1.2% rate. Personal consumption was unrevised at a 3.3% gain for Q2, matching estimates. Personal consumption grew by an unrevised 1.9% in Q1.

On inflation, the GDP Price Index was unadjusted at a 1.0% gain, in line with forecasts, while the core PCE Index, which excludes food and energy, was unadjusted at a 0.9% rise, matching expectations.

Weekly initial jobless claims rose by 12,000 to 272,000 last week, above forecasts of 270,000, with the prior week’s figure being revised higher by 1,000 to 260,000. The four-week moving average gained by 9,000 to 277,750, while continuing claims fell 45,000 to 1,934,000, south of estimates of 1,993,000.

The advance goods trade deficit narrowed unexpectedly to $62.9 billion in August, from the downwardly revised $63.9 billion in July, and compared to expectations of $65.1 billion.

Preliminary wholesale inventories rose 1.0% month-over-month (m/m) in August, versus forecasts for a 0.4% increase, and following July’s unrevised 0.6% rise.

The Kansas City Fed Manufacturing Activity Index for September unexpectedly showed growth (a reading above zero) accelerated, rising to 17 from August’s 16 reading, versus forecasts of a dip to 15.

Treasuries were mixed, with the yield on the 2-year note dipping 2 basis points (bps) to 1.46%,the yield on the 10-year note nearly unchanged at 2.31% and the 30-year bond rate adding 1 basis point to 2.87%.

Treasury yields eased off a recent rally that took the rate on the 10-year note to multi-month highs, while the U.S. Dollar Index pared a jump as of late to levels not seen in over a month. These moves were bolstered by heightened December Fed rate hike expectations and apparent optimism regarding fiscal policy as some details regarding tax reform were released.

Schwab Center for Financial Research – Market Analysis Group

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