Economic reports are starting to support traders' bets. The government reported Friday that the economy shrank at a pace of just 1 percent in the second quarter, better than analysts anticipated. In the first three months of the year, the economy shrank at a pace of 6.4 percent, the steepest slide in nearly 30 years.
Despite the improving outlook, the economy still faces significant hurdles. Analysts worry that difficulty for consumers in borrowing, unemployment and a still-weak housing market will choke off growth. Key reports next week on manufacturing, housing, employment and the service industry could also reshape the market's view about where the economy is headed.
The economy has done "measurably better than we expected," said President Obama after the House vote, attributing the improvement to the American Recovery and Reinvestment Act.
"As far as I'm concerned, we won't have a recovery as long as we keep losing jobs," cautioned Obama."But history does show that you have to have economic growth before you have job growth." The latest GDP figure shows we're "moving in the right direction," he said.
The Dow Jones Industrial Average rose 17.15 points, or 0.2%,to 9171.61, while the S&P 500 gained 0.72 points, or 0.07%, to 987.47. The Nasdaq Composite fell 5.8 points, or 0.3%, to 1978.5.
"The big picture is that the economy shows signs of life, and even when there is bad news, stocks seem to do well," says Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "No matter what's thrown at it, this market seems to want to work its way higher, and you have to look at that bullishly."
The bottom line, says Detrick, is that a lot of people are trailing the market, and there's still a lot of money that's going to be chasing it.
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