US stocks recovered on Friday after Thursday’s slump

After a 2-month record plunge on Thursday in Wall Street, US stocks recovered on Friday. News that the US economy had grown by a revised 4.6% in the second quarter helped.

After falling 264 points on Thursday, the Dow Jones industrial average recovered 167.35 points on Friday, closing at 17,113.15, i.e. a 1% bounce back.

Other US markets also had a good Friday. The Standard & Poor’s 500 index rose 0.9% (16.86 points to 1982.85), while Nasdaq posted a 1% (45.45 points) increase to 4512.19.

You could hear the cheers echoing down Wall Street as soon as the Commerce Department published Q2 4.6% GDP growth. It was the largest increase in 30 months. Much of the expansion was driven by exports, which increased by a revised 11.1% during the quarter.

US stocks recovered thanks to strong GDP figures.

Why did stocks slump on Thursday?

Analysts could not explain why stocks fell so much on Thursday. There was no big news item circulating that might send investors looking for cover.

However, you do not need to look very far to realize there are lots of negatives out there, which when added together could spook people and companies into a wait-and-see mode:

• The likelihood that the US Federal Reserve will raise interest rates grows.

• The German economy shrank in the second quarter. Business sentiment in Germany has fallen. The French economy is standing still.

• Allied sanctions against Russia have been extended. Russia is bound respond with tit-for-tat measures.

• China’s GDP growth is starting to look wobbly.

• Ever since Japan raised its sales tax from 5% to 8% consumer demand has dried up.

• The Eurozone keeps reporting falling inflation and weak growth. In fact, the currency bloc posted zero growth in the second quarter.

• After two consecutive quarters of GDP decline, Brazil is technically in recession.

• Air strikes in Syria/Iraq have intensified as more countries join the US with air strikes.

• The US government published disappointing durable goods orders for August.

• Apple stocks are in trouble.