Wall Street Takes GDP Report in Stride - New York Times

Reaction was muted given that the estimate for the country’s gross domestic product matched expectations. The stock market has tapered off slightly from last month’s rally but continues to make gains amid generally upbeat corporate earnings for the quarter.

The G.D.P. growth rate was a slight increase from the previous quarter, which grew at a 1.7 percent rate. The economy expanded at a 3.7 percent pace in the first quarter.

“There really isn’t a very marked reaction,” said Keith B. Hembre, chief economist and chief investment strategist at First American Funds. “It was pretty much on consensus number, so there was nothing in the way of a surprise factor in terms of the overall total.”

For most traders, next week’s midterm elections and the anticipation that the Federal Reserve will announce new asset purchases overshadowed Friday’s data. In addition, a new survey released on Friday showed consumer sentiment, an essential driver of any recovery, was revised down slightly. The University of Michigan Consumer Sentiment Index was 67.7, down from 67.9, and below a median forecast of 68.

“This is hardly surprising in view of all the headwinds facing the consumer, most of which are likely to persist for some time,” Joshua Shapiro, the chief United States economist for MFR, said.

In late morning trading, the Dow Jones industrial average was up 2.46 points. The Standard & Poor’s 500-stock index was flat, while the Nasdaq composite gained 3.30 points.

European markets regained ground after the G.D.P. report. In London, the FTSE 100 was 11.40 points, or 0.2 percent, higher. The DAX in Frankfurt and the CAC 40 in Paris were both up about 0.2 percent.

The dollar was broadly lower against other currencies.

Analysts and traders are sifting through statistics and corporate results for signs that the economy can sustain any momentum.

Peter Cardillo, the chief market economist for Avalon Partners, said that third-quarter results and guidance have generally performed well or exceeded expectations, and the market is on track, at least in early trading on Friday, to show a gain for the month of about 3 percent.

“The combination of good earnings and low interest rates are quite favorable for the market,” he said.

Consumer spending rose 2.6 percent, according to Friday’s G.D.P. report, the highest quarterly growth since 2006. But spending is not entirely recovered, with many households still seeking discounts and under pressure from an uncertain job market.

On Friday, Chevron Corporation, the oil company, reported a decline in third-quarter income that it attributed partly to a moratorium on drilling in the Gulf of Mexico. Earnings were $3.77 billion, or $1.87 a share. The figure was also a decrease from $3.83 billion, or $1.92 a share, in the same period a year ago. The results were helped by higher oil and gas prices.

Shares fell 1.7 percent, to $83, in early trading.

The financial markets are also repositioning for the expected announcement next week of a new round of quantitative easing by the Federal Reserve to help stimulate the economy. Uncertainty over the amount and timing of asset purchases is still overshadowing the markets.

Mr. Cardillo said he expected the market to remain stuck in a tight range until after the mid-term Congressional elections on Tuesday and the Fed meeting on Wednesday.

Some analysts predict the amount of quantitative easing by the Fed could be about $500 billion, at least at the start.

“I kind of think the Fed might surprise in that they might do a little bit shy of that,” he said. “If that is the case, it could disappoint the market.”

The economic figures did little to change expectations for Fed action. Nominal G.D.P., which takes into account market prices, expanded at a rate of 4.2 percent in the third quarter, a rate that an economist noted was broadly in line with the 4 percent to 5 percent range desired by the central bank.

“At this stage next week is baked into the cake,” said Dan Greenhaus, the chief economic strategist for Miller Tabak & Company, speaking about the prospect for an announcement of further asset purchases after the Fed’s policy makers meet on Nov. 3

“If anything, the data in today’s G.D.P. report provides further support, as the Fed sees it, for trying to stimulate inflation and the economic recovery,” Mr. Greenhaus said.

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