GDP rebounds from -0.5% in Q1 to 3% in Q2
Driven by reduced imports and consumer recovery
Fed to announce rate decision this afternoon... Microsoft and Meta to report earnings
The three major indexes on the New York Stock Exchange opened higher on July 30 (local time). As the U.S. economy achieved a surprising 3% growth in the second quarter, surpassing expectations, investors are now awaiting the Federal Reserve's key interest rate decision and major corporate earnings reports scheduled for later in the day.
As of 10:33 a.m. on the same day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average (Dow) was up 88.32 points (0.2%) from the previous trading day, standing at 44,721.31. The large-cap S&P 500 index rose 15.78 points (0.25%) to 6,386.64, while the tech-heavy Nasdaq index climbed 83.41 points (0.4%) to 21,181.7.
The U.S. Department of Commerce announced that the advance estimate for real gross domestic product (GDP) in the second quarter increased by an annualized 3.0% compared to the previous quarter. This marks a significant rebound from the 0.5% contraction in the first quarter and exceeds the market forecast of 2.3% compiled by Dow Jones. The key factors driving this growth rebound were a decrease in imports and a recovery in consumption. Although exports fell by 1.8%, imports plunged by 30.3% as companies completed inventory accumulation in the first quarter. With the trade balance improving, net exports contributed 5 percentage points to GDP. Real consumer spending, which accounts for about two-thirds of total GDP, increased by 1.4%, a significant rise from 0.5% in the first quarter.
Market attention is now focused on the Fed's interest rate decision. The Fed will hold a regular Federal Open Market Committee (FOMC) meeting later in the day to decide whether to maintain the current benchmark rate of 4.25-4.5% per year. The market sees a high probability of a rate freeze, and attention is also on comments from Fed Chair Jerome Powell at the press conference and differences in views among FOMC members. With President Donald Trump publicly demanding a rate cut, there is speculation that Christopher Waller, a Fed Governor considered 'pro-Trump,' and Fed Vice Chair Michelle Bowman may support a rate cut.
Jalim Tempelman, Vice President of Fixed Income Research at Mutual of America Capital Management, said, "Although political scrutiny is intensifying, Chair Powell continues to show patience regarding rate decisions," adding, "The financial markets do not expect the Fed to change its monetary policy at least until September."
After the market closes, Microsoft (MS) and Meta, the parent company of Facebook, will announce their earnings.
Additionally, with just two days left until August 1, the expiration date for the U.S. mutual tariff suspension, there is growing attention on whether an additional trade agreement can be reached. Major countries, including South Korea, are making all-out efforts to finalize last-minute trade negotiations with the United States. The United States and China also reached a provisional agreement in the third high-level trade talks completed the previous day in Stockholm, Sweden, to extend the 'tariff truce,' which lowers mutual tariffs by 115% for 90 days. It is reported that only President Trump's approval remains.
By stock, Visa is up 0.76% after reporting better-than-expected earnings. In contrast, Starbucks is down 1.09% despite solid earnings. MS and Meta, both reporting earnings today, are up 0.3% and 0.5%, respectively.
U.S. Treasury yields are rising. The benchmark 10-year U.S. Treasury yield, a global bond benchmark, is up 2 basis points (1bp=0.01 percentage point) from the previous session at 4.36%, while the 2-year Treasury yield, which is sensitive to monetary policy, is up 3 basis points to 3.9%.
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