First quarter GDP came in below expectations at 2.2%
(estimates were 2.5%) and less than the 4Q growth of 3.0%. Strong consumption growth of 2.9% was the highlight
of the report, rising the most in six quarters.
Inventories rose, retarding final sales (up 1.6%), which were above Q4
sales but well below the 3.2% increase in Q3.
Nonresidential investment declined by 2.1%, the first decline since Q4 2009,
and was pulled down by a 12.0% decline in construction spending. Residential construction posted its strongest
quarter since the homebuyer tax credit in Q2 2010, rising 10%. Net exports were a wash in the quarter. Government spending fell by 3.0%, the sixth
consecutive quarterly decline. The
upside for stocks is that this economic weakness could result in earlier than
anticipated assistance from the Fed.
Earnings continue to drive individual stocks. Amazon (AMZN) is up 15% this morning after
posting better than expected revenues and profit. AMZN announced they now have 173 million
active accounts. Starbucks (SBUX) is
down 5% after reporting weaker than expected comps as the company cited European
weakness as the culprit. Small cap Ball
Corp (BLL) reported in line number yesterday, and was at least the 15th
report I listened to in which management cited weakness in China and
Brazil.
Robert Stevens, the longtime CEO of Lockheed Martin (LMT), announced
his plan to retire from the aerospace firm.
Stevens recently rankled feathers by saying that he wouldn’t be hiring
or investing in new projects due to the “uncertainty being created by the lack
of leadership” in Washington.
The Fed finished their meeting Wednesday, and Chairman Ben
Bernanke had a message for the President and Congress: don’t send us off the fiscal cliff. “If no action were to be taken by the fiscal
authorities, the size of the fiscal cliff is such that there’s absolutely no
chance that the Federal Reserve could or would have any ability to offset that
effect on the economy” he said.
Think austerity has had an impact on European growth? Check out the chart below, courtesy of Hale
Stewart. It shows the fall off from a
slow recovery over the past three quarters as austerity programs began taking
hold.
Spain, the home of 24% unemployment and spiking yields,
might have another problem brewing. As the
country’s growth continues to spiral downwards, Spanish banks are facing
another headwind as nonperforming real estate loans are spiking. The IMF is suggesting that the sound banks
will suffer along with the weaker banks as the NPL’s increase, resulting in a
bank bailout. In response, and just
before having their debt cut by S&P, Spanish Economy Minister Luis de
Guindos ruled out a bailout. “We don’t
need it!”
The Argentinian (Argentine?-Bueller, anyone?) Senate passed
a bill to nationalize 51% of YPF, the nation’s largest energy company. The Congress will take a look at the bill
next week.
I don’t want to keep pounding on the Angels, because I know
they’ll turn it around, but so far the $240 million spent on Albert Pujols hasn’t
played out so well. The great slugger,
who has 445 career home runs, hasn’t hit one since September 22, and is only
batting .224 with a .280 on-base percentage since joining the Angels. Had I known that kind of average could garner
a big contract, I’m not sure I would have ever given up the game.
How about three QB’s going in the top 10 last night of the
NFL draft? Luck and RG-III were givens
as 1-2 in the draft, but Ryan Tannehill at #8?
Have a great weekend
Ned
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