The major domestic equity indexes stocks rose on Wednesday after stronger-than-expected economic growth outweighed concerns about escalating tensions between the United States and North Korea and the uncertainty resulting from the aftermath of Hurricane Harvey. The Nasdaq closed within 1 percent of its record closing high set in late July.
Gross domestic product was revised higher to show a 3.0 percent annual growth rate in the second quarter, due partly to robust consumer spending as well as strong business investment.
Adding to the positive sentiment, private-sector employers beat economists’ expectations as they hired 237,000 workers in August, marking the biggest monthly increase in five months.
President Trump said he wants to see the corporate tax rate drop to 15 percent but the White House offered no new tax plan, leaving the proposal in the hands of Congress.
Tax reform was one of Trump’s main talking points during his campaign and expectations for its passage have been a main driver of stock gains since he won the presidency.
Tensions between the United States and North Korea seemed to escalate after Trump dismissed any diplomatic negotiations via a tweet, saying “talking is not the answer,” a day after Pyongyang fired a ballistic missile that flew over Japan.
However, Defense Secretary Jim Mattis later said the United States still has diplomatic options.
H&R Block fell 8.3 percent to $26.81 after the tax preparation service provider reported a larger-than-expected loss.
Aerovironment rose 18.2 percent to $46.52 after the drone manufacturer reported a smaller-than-expected loss and revenues that exceeded estimates.
Analog Devices closed up 5.2 percent at $83.72 after the chipmaker’s quarterly earnings and guidance exceeded expectations.
Approximately 5.12 billion shares changed hands on the major domestic equity exchanges, a number that was below the 5.84 billion share daily average over the past 20 trading sessions.
Economy Exceeds Expectations
The economy grew faster than initially thought in the second quarter, notching its quickest pace in more than two years, and there are signs that the momentum was sustained at the start of the third quarter.
Gross domestic product increased at a 3.0 percent annual rate in the April-June period, the Commerce Department said in its second estimate on Wednesday. The upward revision from the 2.6 percent pace reported last month reflected robust consumer spending as well as strong business investment.
Growth last quarter was the best since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that second-quarter GDP growth would be raised to a 2.7 percent rate.
Retail sales and business spending data so far suggest the economy maintained its stamina early in the third quarter. There appears to be a limited impact on growth from Hurricane Harvey, which devastated parts of Texas.
Growth estimates for the third quarter are as high as a 3.4 percent rate. Other data on Wednesday showed private employers ramped up hiring in August, adding 237,000 jobs to their payrolls. That was up from 201,000 jobs in July.
The ADP National Employment Report was released ahead of the government’s more comprehensive employment report on Friday, which is expected to show solid job gains in August and diminishing labor market slack.
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