S&P 500, Nasday Surge to New Records as U.S. GDP Defies Grim Forecasts

The Dow and broader U.S. stock market advanced Friday, with the S&P 500 and Nasdaq returning to record highs after the Commerce Department said the world’s largest economy expanded much faster than expected in the second quarter.

S&P 500, Nasdaq Notch New Highs

All three major U.S. stock indexes recorded gains in the final session of the week. The broad S&P 500 Index of large-cap stocks rose 0.7% to 3,025.86. The record-setting rally was driven largely by communication services, which rose more than 3% as a sector. Consumer staples, financials and utilities stocks also made strong contributions.

S&P 500 Index sets a new all-time high. | Source: Yahoo Finance.

The technology-focused Nasdaq Composite Index surged 1.1% to 8,330.21, which was also a new all-time high.

The Dow Jones Industrial Average edged up 51.47 points, or 0.2%, to close at 27,192.45. The blue-chip index was held back by slumping shares of Dow Inc. (NYSE:DOW), 3M Co (NYSE:MMM) and Chevron Corp (NYSE:CVX).

Alphabet Surges on Earnings Beat

Shares of Alphabet Inc. (NASDAQ:GOOGL) surged more than 10% on Friday after the tech giant reported better than expected quarterly results.

The Google parent company reported per-share earnings of $14.21 on revenue of $38.94 billion, crushing estimates on both fronts. Advertising revenue jumped to $32.6 billion for the second quarter, up from $28.09 billion a year ago.

During the earnings call, the company said its board of directors approved a $25 billion repurchase of its Class C capital stock. The capital will be used to support growth and acquisitions.

Based on the latest available data, U.S. companies are outperforming their profit and revenue estimates for the second quarter. FactSet says nearly four-out-of-five S&P 500 companies have reported better than expected earnings so far.

U.S. Economy Outperforms Expectations

As far as advanced industrialized economies go, the United States is leading the way. On Friday, the Commerce Department said gross domestic product (GDP) – the broadest measure of economic output – rose at an annualized 2.1% pace in the second quarter. While much lower than the first-quarter rate of 3.1%, the second-quarter tally far exceeded the Atlanta Fed’s estimate of 1.3% and came in well ahead of analysts’ forecasts for 1.8%.

Consumer and government spending made significant contributions to national GDP. Personal consumption expenditures rose 4.3% between April and June, the biggest gain since the fourth quarter of 2107. Government spending jumped 5%, the largest increase since 2009.

The GDP report seems to have quelled fears that the U.S. economy was heading toward recession amid an ongoing trade dispute with China.  The tariff war has taken the steam out of U.S. manufacturing, with the sector barely avoiding contraction in July, according to IHS Markit’s latest PMI report.

Featured image courtesy of Shutterstock. Chart via Yahoo Finance. 

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi