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Markets & Stocks
Endangered expansion
August 26, 2001: 7:00 a.m. ET

It's not new data, but the 2Q GDP figures could turn heads
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - Typically, a revision to U.S. gross domestic product brings only yawns on Wall Street. But this time could be different.

Economists say the government's broadest look at the economy during the second quarter, due Wednesday, could show the first quarterly contraction in more than eight years.

GDP hasn't fallen since the first quarter of 1993, when the country was emerging from recession. And the economy has been expanding on a yearly basis since 1991, the start of the longest peace time growth streak on record.

Wednesday's figures on second-quarter GDP could mark the beginning of the expansion's end. Steven Wood, economist at FinancialOxygen, forecasts a 0.2 percent decline.

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"The highlight will likely be Wednesday's... revision," Wood said.

Last month, the government's first read on second-quarter GDP showed a 0.7 percent gain. But since then, new figures have revealed falling exports, imports and sales, leading analysts to downwardly revise figures for growth.

"The U.S. economy is slumping," said John Lonski, economist at Moody's Investors Service.

With that in mind, the Federal Reserve last week cut interest rates for the seventh time this year, taking the federal funds rate to 3.50 percent. That's the lowest level since early 1994.

Still, Lonski called Wednesday's GDP number "water under the bridge," a reference to the age of the data, which covers the April-June period. "It's more of a curiosity story," he said.

Lonski also suspects that the worst may be over for the U.S economy. Stocks rose last week, helped by a powerful rally Friday that came after Cisco Systems signaled that business is stabilizing.

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The Dow Jones industrial average rose 1.8 percent on the week, narrowing its losses for the year to 3.4 percent. The Nasdaq composite index advanced 2.6 percent but is still off more than 22 percent in 2001.

Annual profits at America's largest companies are expected to post their first annual decline in a decade. And this year's steady slide in stock prices reflects that.

But Paul McManus, senior vice president at Independence Investment LLC, does not believe there is much more downside risk in the stock market.

"The market appears to be forecasting zero growth in earnings next year," McManus said. "I don't think that's going to happen, so that's where the opportunity lies."

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Following Cisco, investors will get an outlook from another tech bellwether Tuesday when Sun Microsystems gives a mid-quarter update.

But the week's focus will be on economic data.

The housing sector has largely defied the economy's slowdown. Existing home sales figures Monday are expected to show that sales came in at an annual rate of 5.30 million in July, down just slightly from 5.33 million in June.

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On Friday, the government said sales of new homes in the United States jumped 4.9 percent in July.

Consumer confidence figures Tuesday are expected to show a slight rise in August, a month when taxpayers were receiving some $38 billion in tax rebates.

Personal income is seen rising 0.3 percent in July, matching June's gain, when the government reports the figures Thursday

Factory orders for July, due Friday, are expected to drop 0.7 percent following June's 2.7 percent decline.

Alan Greenspan, the Federal Reserve chairman, will be speaking later this week at an annual conference in Jackson Hole, Wyo.

His Friday remarks cap the end of a summer that many stock investors, bruised by losses, will be happy to see go. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.