Tuesday, December 22, 2009

One Step Closer to the Finish Line

As yesterday's blog post indicated, third-quarter GDP growth was expected to come in at nearly 3%. Today, the Commerce Department said the final reading came in at only 2.2%, well below expectations. Clearly, this was negative news. However, the market it up another 0.5% halfway through the trading day. Why?

The National Realtors Association said homes sales rose 7.4% in November, a figure much higher than expected. (However, it is likely that figure received a large boost from consumers' desire to take advantage of the home-buyer tax credit.) Amazingly, one in three homes sold was coming off a foreclosure.

Additionally, the steeper yield curve (meaning investors are starting to be rewarded for buying bonds with longer maturities -- a sign the economy is improving) and the potential of higher interest rates both indicated a stronger economy and kept gains in check amid the GDP uncertainty.

No comments: