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Stock Market Today: GDP Revised Lower, Can Stocks Hold Gains?

The major headlines in the stock market today include: Second-quarter GDP is revised even lower, durable goods orders fall and jobless claims remain high.

Yet, stocks are up thanks to news from overseas…

  • Final GDP reading reveals even weaker economy– The United States second-quarter gross domestic product grew at a lethargic 1.3% rate compared with the original 1.7% estimate. The downward revision was impacted by the drought but nonetheless the economy has stalled. "Consumption is not good," Thomas Simons, an economist at Jefferies Group Inc. in New York told Bloomberg News. "Consumers are still driving GDP but only at a very modest pace." This rate was much lower than the 2% growth of the first quarter and now makes the scenario of going off the fiscal cliff much scarier. If that happens economists say the U.S. will most likely head into a recession. From the latest GDP numbers it looks like we are already headed in that direction.
  • Note for Investors: Economic data like this is exactly why income is key. .

    • Durable goods orders stumble most since January 2009- In August the amount of orders American factories received for durable goods declined 13.2% from the prior month. The sharp drop was led by waning demand for civilian aircraft and automobile orders which had been two positives in manufacturing over the summer. Economists had expected orders to decline but only by 5%. "It just shows the manufacturing side of the economy continues to labor here, and in fact, contract," Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York told Reuters.
    • Jobless claims better than expected but still troubling– For the week ended Sept. 22 there were 359,000 people who filed for initial jobless benefits, down 26,000 from the previous week. The four-week average which is a less volatile figure also fell to 374,000 but that is also the average number of claims over the first eight months of the year. Both last week's number and the four-week average are above the 350,000 level that economists say indicates hiring is strong enough to bring unemployment down. This is another indicator that unemployment has not improved at all this year and at this rate hiring can barely keep up with population growth. "You put it all together, a lot of this is backward looking data, some of this is more forward looking. It's certainly a negative but not a disaster," said Solaris' Ghriskey.

    In early trading stocks were slightly higher over speculation that China will bolster its stimulus efforts. This week China's central bank injected $57.9 billion into money markets, the largest weekly dose in history.

    Investors are also looking for encouraging signs from Spain when its cabinet meets to approve an austerity budget for 2013.

    The disappointing economic indicators might send the markets down by the end of the day but here's a huge winner today:

    • Tempur-Pedic International Inc. ( NYSE: TPX) has agreed to acquire rival mattress company Sealy Corp. ( NYSE: ZZ) in a deal valued at $229 million. Tempur-Pedic has had a rough year, losing more than half its market value after lowering full-year forecasts in June due to stiff competition. Yet its shareholders appear to be the winner in this deal as the offer price for Sealy's shares was only a 3% premium from where the stock closed Wednesday. TPX stock is up almost 20% and ZZ stock is up 3.5%.

    The Dow Jones was up 20 points, or 0.15%, and the S&P 500 was up 5.60 points, or 0.39% as of noon.

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