Daily Market Color

Robust GDP Data Drives Stocks Higher as Harvey Boosts Gasoline

Key economic data released today displayed strong results, beginning with the second estimate of Q2 GDP.  The Commerce Department revised economic growth in the second quarter of 2017 to a 3% annualized rate (2.6% initial estimate), its fastest pace in two years, led by robust consumer spending (+3.3%) and business investment (+6.9%).  The increase in household spending was tied to strength in the labor market, tepid inflation and persistently low interest rates while business spending on software and equipment outpaced estimates.



The ADP national employment report for August was also released today, displaying the number of new hires by private employers in the US at 237,000.   The figure represents a significant uptick from July’s 201,000 upwardly revised level (178,000 initial reading) and was substantially higher than expectations of 185,000.  Steady employment gains were observed across most major industries, with the service sector adding 204,000 jobs while employment in goods-producing industries rose 33,000.  Often a leading indicator for the Labor Department’s more comprehensive employment report, today’s ADP figure foreshadows robust gains in Friday’s nonfarm payrolls figure, with current expectations pointing towards a 180,000-monthly increase for August after a solid 209,000 gain in July.
Risk assets increased during the trading session in response to the positive data.  All three major US stock indices gained 0.1%-1.0% on the day, led by the tech-heavy Nasdaq.  Treasurys experienced a modest selloff, with yields/swap rates up 1-2 bps across the curve, bringing the yield on the 10-year note above 2.13%.  The US dollar continued to recover from yesterday’s two-year low and is currently up 0.4% against major currencies.  Gasoline and oil futures continued to trend in opposite directions as Tropical Storm Harvey made landfall again this morning.  Gasoline rose to a new two-year high, up 6.% on the day, while WTI crude declined 1% on the day to just below $46/barrel.  


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