The American Economy Grows, But Not Without Obstacles

Last week, stock prices rose on global exchanges, with the Dow Jones and S&P 500 indices on Wall Street reaching new record levels, as the U.S. and European central banks indicated they would continue to pursue an accommodative monetary policy.

On Wall Street last week, the Dow Jones strengthened by 0.6 percent to 15,658 points, while the S&P 500 rose by 1.1 percent to 1,709 points. Both indices reached new all-time highs, while the Nasdaq index increased by 2.1 percent to 3,689 points, the highest level in 13 years.

The positive sentiment in the markets is attributed to investor confidence after Fed leaders indicated on Wednesday from a two-day meeting that the economy still needs support, and therefore they will continue to implement programs for purchasing government and mortgage-backed securities.

In this way, the U.S. central bank injects $85 billion of fresh, cheap money into the financial markets each month, which has long been driving stock price growth.

In addition to the Fed, the European Central Bank will also continue its accommodative monetary policy. Its president, Mario Draghi, stated on Thursday, after the ECB leaders’ meeting, that key interest rates in the eurozone will remain at their current record low levels for an extended period.

Investors were also encouraged by the data showing that the U.S. gross domestic product grew by 1.7 percent in the second quarter, significantly higher than the expected 1 percent. This also represents an acceleration in growth, as the revised estimate showed that the economy grew by 1.1 percent in the first quarter, rather than the initially estimated 1.8 percent.

The American economy is growing, but not without obstacles, as evidenced by the slowdown in employment growth in July. In that month, the number of employed increased by 162,000, less than the expected 184,000. However, the unemployment rate fell from 7.6 to 7.4 percent, the lowest level in more than four years.

The season for quarterly business report announcements has continued, and most companies are reporting better results than expected.

So far, about 390 companies from the S&P 500 index have released their business reports, with 67.8 percent exceeding analysts’ expectations for earnings and 55 percent for revenue.

Stock prices also rose on European exchanges last week. The London FTSE index strengthened by 1.4 percent to 6,647 points, while the Frankfurt DAX rose by 2 percent to 8,406 points, and the Paris CAC increased by 1.9 percent to 4,045 points.

On the Tokyo Stock Exchange, the Nikkei index jumped by 2.4 percent to 14,466 points last week.