Trade, Defense Spending Boost Third-Quarter Growth

Alamy WASHINGTON -- A smaller trade deficit and a surge in defense spending buoyed U.S. economic growth in the third quarter, but other details of Thursday's report hinted at some loss of momentum in activity. Gross domestic product grew at a 3.5 percent annual rate, the Commerce Department said Thursday, beating economists' expectations for a 3 percent pace. While the pace of growth in business investment, housing and consumer spending slowed from the second quarter, all those categories contributed to growth. "The report was broadly constructive, with the gains broadly based and pointing to positive underlying momentum in the U.S. economy," said Millan Mulraine, deputy chief economist at TD Securities in New York. "However, with some indications of weakness emerging in housing and consumption spending, we expect the pace of growth to slip further in the fourth quarter." Despite decelerating from the second quarter's brisk 4.6 percent pace, it was the fourth quarter out of five that the economy has expanded at or above a 3.5 percent clip. A separate report from the Labor Department showed first-time applications for unemployment benefits rose modestly last week, but remained at levels consistent with firming labor market conditions. The data came one day after the Federal Reserve ended its asset purchasing program. Fed officials said there was sufficient underlying strength in the broader economy. The dollar extended gains against the euro and the yen, while prices for U.S. Treasury debt trimmed gains. The narrower trade deficit reflected a plunge in imports, which fell at their fastest pace since the fourth quarter of 2012. That was largely attributed to a drop in oil imports. Trade added 1.32 percentage points to growth. Although there are concerns a strengthening dollar and slowing euro zone and Chinese economies will crimp U.S. export growth, economists believe the impact will be marginal. Government spending was also a boost, with defense spending rising at a 16 percent rate, its fastest pace since the second quarter of 2009. One of the few areas that was a drag on growth was inventories, which subtracted 0.57 percentage point from GDP after adding 1.42 percentage points in the second quarter. Business Spending Slows Growth in business investment slowed in the third quarter, with spending on equipment rising at only a 7.2 percent rate. Economists had expected a second straight quarter of double-digit growth. Business spending on structures and intellectual property products also slowed. Data on Tuesday suggested further moderation in the pace of equipment investment in the fourth quarter, but it is still expected to remain strong enough to keep the economy on a higher growth pace. While growth in consumer spending decelerated to a 1.8 percent pace from the second-quarter's 2.5 percent pace, it still contributed 1.22 percentage points to GDP growth. Consumer spending accounts for more than two-thirds of U.S. economic activity. The moderate pace of consumer spending helped keep inflation pressures under wraps during the quarter. A price index in the GDP report rose at a 1.2 percent rate in the third quarter after advancing at a 2.3 percent pace in the prior period. A core price measure that strips out food and energy costs increased at only a 1.4 percent pace, slowing sharply from the second quarter's 2 percent rate. Declining gasoline prices and accelerating job growth, which is expected to lift wages, will provide tailwinds for consumer spending in the fourth quarter. If you thought this classic horror movie was about a haunted house, see if this scenario sounds familiar: An idealistic young couple buys a home that sounds too good to be true. Once they're mortgaged to the hilt, problems start to crop up. They can't leave, they can't stay, and an unseen evil force starts to tear their family apart.

Chrysler Recalls Over 566,000 Vehicles for Safety Issues

Chrysler via AP DETROIT -- Fiat Chrysler (FCAU) is recalling more than 566,000 trucks and SUVs in two recalls for malfunctioning fuel heaters that can cause fires and a software glitch can disable the electronic stability control. The recalls bring the newly merged company's total for the year to 6.4 million vehicles worldwide and 5.1 million in the U.S. as it continues to struggle with reliability problems. It wasn't immediately clear whether those totals were annual records. On Tuesday, its longtime quality chief abruptly left after Fiat Chrysler performed poorly in Consumer Reports magazine's annual reliability rankings. The largest of two recalls announced Wednesday covers almost 382,000 Ram 2500 and 3500 pickups and Ram 4500 and 5500 chassis cabs from 2010 through 2014. In trucks with 6.7-Liter Cummins diesel engines, corrosion on a fuel heater terminal could cause overheating, fuel leaks and fires. Chrysler isn't aware of any fires or injuries. Owners could be warned by an odor of diesel fuel. Customers will be notified by letters starting in December. Dealers will install upgraded terminals and fuel heater housings could be replaced. The second recall covers more than 184,000 Jeep Grand Cherokee and Dodge Durango SUVs from 2014. A debris cover over a circuit board in the steering column control module can disrupt communications and disable the stability control. The problem was discovered when dealers started getting reports from customers that electronic stability control warning lights were coming on. Fiat Chrysler says it knows of no crashes or injuries caused by the problem. Technicians will upgrade software to fix the SUVs, and customers will be notified in December. Fiat Chrysler has issued 33 global recalls and 27 in the U.S. so far this year. Doug Betts, its longtime quality chief, left the company to pursue other options after Consumer Reports' survey-based rankings this year showed four Fiat Chrysler brands at the bottom of its list. Dodge, Ram, Jeep and Fiat performed worst of 28 brands ranked by the magazine. Company spokesman Eric Mayne said Fiat Chrysler's recalls average fewer than 200,000 vehicles each, below the industry average of 301,000. That means the company is responding quickly to problems, he said, adding that eight of its 27 U.S. recalls were announced before the company received any consumer complaints. Chrysler isn't alone with a high number of recalls so far this year. Stericycle, a company that tracks recalls, says companies have called back more than 52 million vehicles so far this year, breaking a record set in 2004. MSRP: $26,495 Resale value retained after five years: 50.5 percent Even under Fiat (FIATY) ownership, some elements of Dodge's mouth-breathing, knuckle-dragging, He-Man-Woman-Haters-Club approach to auto sales managed to survive. The built-by-car-guys-for-car-guys Challenger and its rebooted muscle car aesthetic still lingers to lure meatheads who value racing stripes and rims over, oh, just about any other element of their vehicle. Ordinarily, that alone wouldn't make one of these vehicles worth a second look five years from now --  even among the most superficial gearheads. But Fiat helped the Challenger smarten up a little bit by coupling a 305-horsepower V6 engine or 375-horsepower 5.7-liter V8 Hemi with loads of interior space, real-time touchscreen navigation, traffic updates, Bluetooth connectivity,  Sirius (SIRI) XM satellite radio, keyless entry/starter and a whole lot of Harman Kardon audio upgrades.

Market Wrap-up for Oct. 21 – A Busy Week for Earnings

Equity markets opened higher once again this morning, following the largest two-day gain for the Dow industrials since February. Bolstering stocks, Apple reported better-than-expected earnings and revenue numbers for the quarter after Monday’s closing bell. The tech giant noted that strong iPhone sales helped drive its 13% quarterly profit growth.

Last week, much of the market focused on financial earnings from megabanks: JP Morgan (JPM), Citigroup (C), Wells Fargo (WFC), Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS).

This week, investors will once again see a slew of earnings. Below I’d like to highlight a few key reports everyone should keep their eyes on.

Tuesday

After the closing bell, the following companies will be reporting:

Ace Limited (ACE) is expected to report earnings of $2.38 per share. B&G Foods (BGS) is estimated to post an EPS of $0.40. Discover Financial Services (DFS) is slated to report earnings of $1.34 per share for the quarter. Waste Connections (WCN) is expected to post an EPS of $0.54. Wednesday

The following stocks will report their quarterly results on Wednesday:

Abbott Labs (ABT) is slated to report earnings of $0.60 per share for the quarter. AT&T (T) is expected to report an EPS of $0.64. Boeing (BA) is estimated to report earnings of $1.98 per share. Dow Chemical (DOW) is expected to post earnings of $0.67 per share. GlaxoSmithKline (GSK) is estimated to post an EPS of $0.79. Leggett & Platt (LEG) is expected to report earnings of $0.50 per share. U.S. Bancorp (USB) is estimated to report an EPS of $0.78. Thursday

These companies will report their earnings on Thursday:

3M (MMM) is expected to report earnings of $1.96 per share. American Electric Power (AEP) is slated to post an EPS of $1.04. Caterpillar (CAT) is estimated to report earnings of $1.33 per share. Comcast (CMCSA) is expected to post an EPS of $0.70. General Motors (GM) is estimated to report earnings of $0.96 per share. Eli Lilly (LLY) is expected to post earnings of $0.67 per share. Microsoft (MSFT) is estimated to post an EPS of $0.48. T. Rowe Price (TROW)  is expected to report earnings of $1.15 per share. Friday

The following firms will announce their quarterly results on Friday:

Bristol-Myers Squibb (BMY