Stocks Slip at Open on Fourth Quarter GDP

Northern, WI 3/29/12 (StreetBeat) -- The U.S. economy expanded in the fourth quarter of 2011 basically right in line with economists’ predictions. In the Commerce Department’s final estimate released this morning, gross domestic product (GDP) increased at a 3.0 percent annual rate in the final quarter after a 1.8 percent growth rate during the third quarter. This is the fastest clip since the second quarter of 2010. This latest estimate was unchanged from the Commerce Departments’ Q4 expectations announced in February.

Looking to the first quarter of 2012, which ends on Saturday, estimates are coming in already around 2 percent growth in GDP. Federal Reserve Chairman Ben Bernanke said earlier this week that the economy’s growth needs to accelerate in order to drag the unemployment rate lower. The markets cheered the words of Big Ben because it opened the door slightly to the possibility of another round of bond buying, or so-called quantitative easing, although Bernanke specifically did not mention it.

Business re-stocking inventories were a large contributor in the economy remaining relatively strong to end 2011 and accounted for a healthy 1.81 percentage point addition to the Q4 GDP. Excluding those inventories, the economy grew at a 1.1 percent rate, a stark contrast from Q3’s 3.2 percent pace excluding inventories. While there seems to be a bit of a slowdown early in 2012, automobile sales are high and the housing market is still gimping towards recovery, although still a wild card in the big picture.

The GDP statistics are not the necessarily bad by any stretch, but the markets are starting the day heading for their third straight session in the red. The words of Glenn Guard, director of investment management at Campbell Wealth Management, perhaps best echo the sentiment of the markets at the moment when he said earlier today, “With the stock market where it is, up 12% this year, any news that is not fantastic is going to be met with some disappointment.”

In a separate report from the Labor Department, the number of Americans filing initial jobless claims dropped for the week ended March 24, 2012. Reaching its lowest level since April 2008, initial unemployment claims fell 5,000 in the week to 359,000, signaling that the U.S. jobs market continues to ever-so-slowly recover.

An hour after the opening bell, the Dow is off by 62 points, the S&P500 has eased 10 points and the Nasdaq is down 19.

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