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Investors did not pay attention to what was initially perceived as a problem
a weak first quarter GDP report Thursday
Focus instead on the longer-term prospects of economic growth, interest rate and inflation.
The 1.1% annualized increase for the first quarter would have been stronger had it not been for an inventories drag, while a stronger-than-expected inflation reading may have been front-loaded to the early part of the year and not representative of where prices are heading.
Jeffrey Roach, LPL's chief economist, said that the data were a good set-up for the Fed meeting next week. As growth and inflation slow down, the Fed could legitimately switch to a pause. If the economy worsens by the end the year, it may even cut rates outright.
Traders confirmed the likelihood of a quarter-point interest rate hike when the Federal Reserve meets the following week. According to CME Group, the markets still expect at least a half-point worth of interest rate cuts by the end of this year, and then more aggressive reductions until 2024.
Stocks are rising sharply
Dow Jones Industrial Average
The Dow Jones Industrial Average is up over 500 points as we enter the final trading hour on Thursday.