Today's Market Update with...

Harvey Katz, Value Line's Managing Editor

The U.S. government's report yesterday morning of better-than-expected third-quarter GDP growth sparked a vigorous rally in the equity markets, sending the Dow Jones Industrial Average up 200 points, to just under the 10,000 mark. All sectors gained, as investors threw off earlier worries about the sustainability of the current nascent business expansion.

Specifically, the Commerce Department reported that the economy grew by a somewhat above consensus 3.5% in the recently ended third quarter; a gain of just above 3% had been the popular forecast. The GDP report, which seemingly ends the recession, although the National Bureau of Economic Research has yet to give its blessing to the recession's demise, was a welcome respite from what has been a somewhat steady recent procession of less-than-uplifting economic news.

Our sense continues to be that the recession is over. That said, we expect the expansion to slow materially in the current period, with growth coming in closer to 2%. The recent data, especially on employment and housing, has not been as upbeat as we would have hoped.

That said, the bulls have for one day, at least, wrested the reins from the bears and Wall Street may again be ready to move forward. We caution, though, that equities are still extended and unless the news starts to get better, the bull could well falter again.

As for the market this morning, a mild dose of profit taking seems likely at the opening in less than an hour from now.