Tomorrow's GDP number likely to move the market but up or down?

01/28/2010 3:42 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

 When you’re making up your list of market-moving events, don’t forget tomorrow’s (January 29) release of the first take on fourth quarter U.S. GDP (gross domestic product). Economists are looking for strong 4.6% growth in the U.S. economy to end the year.

 Anything less would be a market-moving disappointment. Anything more, as I read the way the numbers are being framed on Wall Street, would only be moderately reassuring since the consensus view is that the economy is set to slow in 2010 from the fourth quarter growth rate.

Still, those of us who are long stocks would certainly prefer that GDP growth come in at 4.6% or better. (The Bureau of Economic Analysis is scheduled to release the data before the stock market opens at 8:30 ET tomorrow morning.)

So what are the signs? The numbers in today’s release on U.S. durable goods (stuff that lasts a while and isn’t destroyed by use such as cars, washing machines, and air planes) orders were a mixed bag. Durable goods orders increased 0.3% in December but the consensus was looking for a 2% increase. Excluding transportation goods, orders jumped 0.9%. The consensus was looking for a 0.5% increase.

 Shipments were up 2.9% in December. That’s usually a positive indicator for GDP growth. New orders for nondefense capital goods (excluding aircraft) climbed 1.3% in the month. Rising orders for capital goods usually reflect rising business investment. The 1.3% increase in December comers on up of a 3.1% increase in November.

A good-sized increase in business investment would be a sign that companies are seeing signs of a pickup in their business in 2010. And when capital goods investment rises, increase hiring usually isn’t that far behind.

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