Nasdaq Thrives: Defying Recession Fears, Apple Becomes the World's First $3 Trillion Company

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The US economy has shown stronger-than-expected growth in the first quarter, according to an upward revision announced by the Department of Commerce on Thursday.

Gross Domestic Product (GDP) for the January-March period recorded an annual increase of 2%, surpassing the previous estimate of 1.3% and the Dow Jones estimate of 1.4%. This revision marks the third and final estimate for the first quarter GDP.

The upward revision has helped alleviate widespread expectations of an impending economic downturn in the US, providing a sigh of relief for those fearing a recession.

Amid the reduction in job cuts, Scott Hoyt, Senior Director at Moody Analytics, noted that the 8.7% increase in Social Security cost-of-living adjustments has boosted consumer spending. He also emphasized the overall resilience of the economy, stating that both consumer spending and exports were much stronger than previously anticipated, as indicated by the summary from the Bureau of Economic Analysis.

Positive developments were also observed on the inflation front, with a cooling trend in the core personal consumption expenditures (PCE) indicator, which is the primary inflation gauge considered by the Federal Reserve (Fed).

Core PCE prices, which exclude food and energy, rose by 4.6% annually, slightly below the expected 4.7% increase. On a monthly basis, there was a 0.3% increase.

The labor market has always been a focal point for the Fed. Currently, there are approximately 1.7 open positions for every available worker. The latest data on unemployment insurance claims, released on Thursday and covering the week ending June 24, showed a decrease to 239,000. This indicated a drop of 26,000 from the previous week and was well below the forecast of 264,000. These developments can be further analyzed with the upcoming release of the ADP Private Sector Employment report and the Non-Farm Payrolls, another key indicator for the Fed.

What Do These Figures Mean?

The sustained strength of consumer spending poses a puzzle for policymakers who aim to reduce inflation without causing a downturn through interest rate hikes. On one hand, the first-quarter data presents some positive signs and inflation has significantly cooled since the middle of last year, while on the other hand, economic growth has slowed but remains ongoing.

However, many forecasters both within and outside the central bank doubt that inflation will continue to decrease as long as consumers remain willing to spend. They may have a valid point. Nonetheless, if the cooling trend in inflation persists and next week's employment data does not indicate a significant increase, the Fed may be convinced that it has reached the end of the road. Instead of implementing "two rate hikes," it could choose to conclude the process with just one rate hike.

Nasdaq Posts Best Start in Forty Years

The technology-heavy index has surged by 32% in the first half of 2023, driven by investor interest in artificial intelligence stocks. This rise marks the best first half of a year for the index since 1983. In fact, US stock markets have overcome a series of challenges since January, including the banking crisis, disagreements over the government debt ceiling, and uncertainty surrounding the Fed's stance on high interest rates.

It is worth noting that a handful of major technology companies, such as Apple, Amazon, Microsoft, Nvidia, Alphabet, Meta, and Tesla, have contributed the most to this market rally. On Friday, Apple's market value surpassed $3 trillion. Chip manufacturer Nvidia, on the other hand, has almost tripled its price since the beginning of the year.

Nasdaq's performance, which has outpaced the broader S&P 500 index's 16% increase since the start of the year, highlights the influence of major technology companies.

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