By Barani Krishnan
Investing.com - Stronger-than-expected economic growth in the second quarter may be a boon to the United States, but not to those long oil and other commodities right now.
Oil prices were flat to lower in late Friday afternoon trading in New York amid concerns that stellar second-quarter GDP might cause the Federal Reserve to reconsider a widely expected rate cut next week.
New York-traded WTI settled up 18 cents, or 0.3%, at $56.20 per barrel.
London-traded Brent, the benchmark for oil outside of the U.S., gained 5 cents, or 0.1%, to close the session at $63.44.
For the week, U.S. crude rose 0.5% after a slide of 7.5% last week. Brent gained 1% after a 6% slump in the week earlier. Both crude benchmarks were supported this week by Middle East tensions, which put a floor beneath a market which intermittently struggled on the notion of weak demand.
Expectations that the Federal Reserve will cut rates by at least 25 basis points at its July 30-31 policy meeting powered a solid run across markets this month, helping stocks on Wall Street, particularly, scale record highs.
Yet the Commerce Department’s report on Friday that U.S. gross domestic product growth expanded at a 2.1% annualized rate in the second quarter, higher than the forecast 1.8%, made some suspect that the Fed might hold back from an immediate easing.
“Remind me why the Fed needs to cut again?” Michael Hewson, chief market analyst at London's CMC Markets, tweeted. “If the Fed does cut next week, I’m struggling to see how there won’t be some form of dissent.”
Hewson added that the headline growth figure in the GDP data, the personal consumption expenditures (PCE) index up 2.3%, and core PCE of 1.8% were all good numbers.
Some argued that the stronger-than-expected second-quarter growth would not derail the Fed’s plans for a rate cut.
"This is just what the market needed, not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course," said Art Hogan, chief market strategist at National Securities.
"We expected bad earnings and bad GDP numbers, but an upside on both is something markets are going to embrace today."