Should Dow Investors Really Be Happy About GDP Growth?
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
One of the basic tenets of investing is that a growing economy leads to greater growth opportunities for individual companies. In that light, today's bounce in the stock market following the upward revision of second-quarter U.S. GDP figures from 1.7% to 2.5% seems justified -- revisions to trade-deficit data and a greater buildup of private-company inventories offset a larger decline in government spending than originally forecast. Yet despite some concerns that favorable data would spur the Federal Reserve to reduce its bond-buying activity, the gains among the Dow Jones Industrials are reasonably substantial today: The average has posted a 74-point gain as of 10:45 a.m. EDT. The S&P 500 and Nasdaq have posted even larger gains.
Yet digging further into the Dow, the biggest gains are the result of company-specific events. Verizon leads the Dow with 4.2% jump on news that it's once again making progress in its efforts to take full control of its Verizon Wireless joint venture from Vodafone , which has jumped more than 8%. Both companies have confirmed that the talks are ongoing, and despite the huge challenges involved in dealing with an asset some value at about $130 billion, Verizon is doing its best to get the financing it will need to pull off one of the largest acquisitions ever. If it succeeds, then Verizon could have the answer it needs to determine its best source of future growth.
Boeing also finds itself among the biggest winners today, gaining nearly 2% after winning another big aircraft order. Canadian airline WestJet will buy 65 of Boeing's 737-MAX aircraft in a deal worth $6.3 billion, with the intent of cutting operational costs by lowering fuel expenses. For Boeing, the order only confirms its long-term assessment of the $4.8 trillion potential market for commercial aircraft over the next two decades.
Finally, outside the Dow, fashion retailer Guess? has soared 13% after reporting favorable earnings and future guidance. Despite some concerns from elsewhere in the apparel retail space, Guess? managed to produce modest revenue growth, defying expectations for falling sales. Even a same-store sales decline of 2% wasn't enough to dampen investor enthusiasm, as shareholders focused on improvements in operating margins that led to the positive bottom-line results. Struggling economies in Southern Europe and China could pose threats in the future, but for now the company seems to have found a profitable answer to the tough conditions in retail.
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The article Should Dow Investors Really Be Happy About GDP Growth? originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Guess? and Vodafone. The Motley Fool owns shares of Guess?. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.