What's going on?

The US economy grew pretty impressively in the second quarter (+3.7%) � significantly more than analysts expected. It helped propel US stocks to another very positive day, finishing up over 2%, after a tumultuous start to the week.

What does this mean?

Back in the first quarter, investors were getting worried about a possible US economic slowdown. It turns out that it really was just the bad weather (and the west coast ports strike) that was slowing the economy � once spring hit, the economy sprung back to life! This news reinforces the view that the US economy is doing just fine, thank you very much. It�s not booming, but it�s growing steadily.

Why should I care?

1. Many of the details of the report suggested that the economy would continue to grow at least into the third quarter (and probably for longer). A growing economy is usually good for stocks, so if the strength continues, then expect it to support US stock prices.
2. The report only covers the second quarter (e.g. March � June), so it�s unclear if any of the recent market turmoil is having a detrimental effect on the US economy -- this is a risk.
3. This report makes it more likely that the US Federal Reserve will raise interest rates, but given the recent market turbulence, most analysts think the Fed will not raise rates at its September meeting (not raising would probably be good for stocks).