Bulls Return to Wall Street; Recession Over? GDP Grows 3.5% – October 29, 2009

Stocks Rally on GDP Report

Stocks rallied Thursday in a broad-based advance after a strong report on GDP gave investors the encouragement they’ve been searching for. Gains were broad based, with 28 of 30 Dow issues rising. Five stocks rose for every one that fell on the New York Stock Exchange. All three major indices surged higher following reports that GDP grew 3.5% in the third quarter. That was better than the 3.2% rate economists were expecting. A separate government report showed that the number of Americans filing new claims for unemployment fell to 530,000 last week from 531,000 the previous week. In earnings news, Motorola (MOT) and Procter & Gamble (PG) both reported better-than-expected profit. However, Nintendo and Exxon Mobil (XOM) reported large drops in quarterly earnings. U.S. light crude oil for December delivery recovered from Wednesday’s downturn, rising $2.66 to $80.12 a barrel on the New York Mercantile Exchange. Bond prices fell, pushing their yields higher. The yield on the benchmark 10-year Treasury note rose to 3.50 percent from 3.42 percent.

Straight from the Street

Exxon Mobil (XOM), known for its record profits, said lower commodity prices weighed on sales and profits during the third quarter. The energy giant experienced a 68 percent drop in earnings per share during the third quarter. Production levels during 2009 have basically remained unchanged from 2008 levels.

Exxon’s Delicate Condition

The US economy returned to growth in the third quarter after a yearlong contraction. The Commerce Department says GDP grew at an annual rate of 3.5 percent last quarter.

America’s Potemkin Economy

The economy has finally made a turnaround, but what about jobs? Will the employment recession last another three years?

Video — GDP: End Of The Recession?

Nintendo’s cash cow, the popular Wii gaming console, wasn’t able to save profit from declining during the last quarter. The company’s profit fell 52% year-over-year due in a large part to a decline in Wii sales.

Why is the Wii wilting?

Sprint (S) is spending a lot of time and money trying to attract new customers. Maybe this is because they are continuing to lose subscribers at a record pace. The nation’s third-largest wireless carrier watched 545,000 net wireless customers disappear during the third quarter. The company also reported a Q3 loss totaling $478 million, which came in lower than expectations.

Procter & Gamble Co. (PG), the world’s largest consumer-products company, said first-quarter profit fell less than analysts estimated after price increases helped counter volume declines.

Rates for 30-year home loans are still on the rise. Freddie Mac’s (FRE) weekly survey of mortgage rates showed that long-term mortgage rates climbed to 5.03 percent this week.

Is the Home Tax Credit Coming to an End? Not if the Obama administration can stop it. The President’s camp endorsed a plan to extend an $8000 tax credit for first-time homebuyers because they believe it is helping stabilize the housing market.

Other Juicy Tidbits

Free chapter from William Bernstein’s new book "The Investors Manifesto: Preparing For Prosperity, Armageddon, & Everything In Between"

Video — Google’s Eric Schmidt on What the Web Will Look Like in 5 Years

The GDP Mirage — By overlooking cuts in research and development, product design, and worker training, GDP is greatly overstating the economy’s strength.

The economy isn’t fixed yet, say Wall Streeters

Verizon: Who Needs the iPhone? — To stay ahead of AT&T and Apple, Verizon is placing a big bet on Android smartphones and other new gadgets.