GDP decrease, Weekly jobless Claims increase! 

Economic growth slowed, Markets growth higher

By: Ahura Chalki

Market analyst – IFC Markets

Another increase in the weekly Jobless claims happened to have the claims missing the estimates seven weeks out of the past eight weeks. On the other hand, US GDP in the second quarter grows just 6.5%, way less than 8.5% of initial estimates. 

Even if it was increasing less than expectations, still 6.5% increase is fantastic, and thanks mainly to the service sector, as COVID-19 vaccination fueled the tourism sector. 

According to the Commerce Department of the United States, the US economy grew 6.3% annually in the last quarter, less than 8.5% of the market estimates. 

The first quarter’s final numbers also show the 6.3% economic growth in the first quarter, less than initial estimates. Also, the revised numbers for the economic development of 2020 show that the US economy contracted 3.4% and less than earlier 3.5% previously estimates. Even that, it is still the most prominent economic drop since 1946. 

On the other hand, today, we had the US jobless claims numbers from the Labor Department. Thursday labor market data showed that initial jobless claims for state unemployment benefits decreased 24K to 400K, but 20K more than 380K market estimates! 

Following these data, I have to mention that continuing jobless claims also increased to 3.269M from 3.262M of the week earlier and more than 3.196M of market estimates. These numbers sent the 4-week average to 394.5K from 386.5K. 

Economic data and market reaction:

Despite these data, economists expect the 7% economic growth this year as the most robust economic growth since 1984. 

With the latest stimulus package of $1.9T of the Biden administration in March, total government aid increased to nearly 6 trillion since the pandemic started in the United States in March 2020. And now, while last night FED held the policies and emphasized that asset purchasing amount of $120B Monthly will be continued as long as the market needs to recover fully and the Labor market reaches its maximum power, with these weaker than expected data, investors can be more confident over continue government assistance, and it is positive for stock markets. 

Besides the current stimulus, we should not forget Biden’s structure plan, which is now approved with a $1.2T budget. 

From the technical point of view, NASDAQ rebounded all its 1.2% decrease on Tuesday to recover above 15K. As MACD histograms are back above 0-level, and price moves above 100 MA, and Parabolic SAR dots, all technical indicators remain bullish. NASDAQ is currently trading on its second resistance, and the next target will be the third resistance at 15,170. 

US GDP and Nasdaq

Risk Warning: Trading-Leveraged Products such as Forex and Derivatives may not be suitable for all investors as they carry a high degree of risk to your capital. Please ensure that you fully understand the risks involved, considering your investment objectives and level of experience, before trading, and if necessary, seek independent advice.

Related post