Midday Market Update: GDP Numbers Enliven Wall Street

The U.S. economy grew in the third quarter for the first time since spring 2008. The news was cheery enough to reverse several days of downward moves in stocks and exchange traded funds (ETFs).

The economy grew 3.5% in the third quarter, its best performance in two years. Spending on homes and new cars, as part of the “cash for clunkers” program, contributed to the growth, reports Jeannine Aversa for the Associated Press. What it means going forward is in doubt, because if unemployment continues to rise it will hamper consumer spending.

This week, the job markets got a reprieve: claims fell more than forecast to their lowest point in seven months, reports Courtney Schlisserman for Bloomberg. It was also the biggest drop since July. Companies appear to be cutting fewer jobs as signs of an economic recovery emerge.

Treasury Secretary Timothy Geithner spoke today about financial reform and said that new legislation will not lead to bailouts. The Obama administration wants laws that would give federal regulators to power to identify and monitor major banks so they can be wound down before collapsing, reports Anne Flaherty for the Associated Press. The law is intended to prevent putting the government in a position where it needs to decide between a big rescue or allowing the bank to fail.

A slew of earnings came forth this morning:

• Procter & Gamble (PG) reported their first-quarter earnings, which were better than expected.  Profits were off 1%, but Procter & Gamble has pledged to be aggressive in winning back market share.
• Exxon Mobil (XOM) said its profits dropped 68% in the third quarter. While the results were the best of the year so far, but Exxon has not reported such low quarterly profits in four years.
• Energy Select Sector SPDR (XLE) is up 1.5% this morning; XOM is 21.4%.

• Motorola (MOT) had an unexpected third-quarter profit, thanks to narrowing losses in its cell phone division. It was their second consecutive quarterly profit this year.
• Kellogg (K) benefited from brand loyalty, which delivered a 6% boost to its profits last quarter. More consumers are eating at home, and they view Kellogg’s cereals as a staple.
  
• PowerShares Dynamic Food & Beverage (PBJ) is up about 1% this morning; Kellogg is 5.2%.

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