US stocks remained relatively unchanged today amid a day of mixed news. The U.S. Bureau of Economic Analysis revised third quarter 2011 GDP down to 2% (off 20% from its original 2.5% estimate.) Revisions happen regularly.
Here’s the revised GDP growth for the year thus far.
Quarter Growth
1Q ’11 .4%
2Q ’11 1.3%
3Q ’11 2.0%
Average 1.2%
That stinks. Yet profits rose in the quarter. According to a WSJ article titled, Profits Rise as GDP Revised Lower (by Jefferey Sparshott and Jeff Bater), “corporate profits –- after tax and unadjusted for inventories or capital consumption — rose at a 6.5% seasonally adjusted rate compared with a year earlier…”
That’s market activity down (GDP) and profits up.
In another news conflict, U.S. Banks Post Strong Profits (by WSJ’s Alan Zibel) reports that “U.S. banks reported their best quarterly profit in more than four years in the third quarter.” Yet, today, the nation’s second largest financial institution, Bank of American/Merrill Lynch was “warned to get stronger” in an article written by Dan Fitzpatrick. That article “identified governance, risk and liquidity management as problems that had to be fixed.”
That’s bank profits up and big trouble for the second largest bank.
On days like these, when mixed signals swirl, stock market buyers and sellers often find themselves in a stalemate. That’s what happened today.