Thursday, September 29, 2016

GDP and Earnings Outlook

Today we received the third estimate for 2nd quarter GDP. It's not a huge deal since it's backward looking, but none the less it was revised upward.  It's now estimated 2nd quarter GDP came in with 1.4% growth vs previous readings of 1.1%. Behind the scenes housing
was actually a drag with investment spending down 0.9%, but when you exclude it investment was up 1%. Additionally energy company spending plunged 57% during the quarter. We'll see the effects it's having on stock market earnings in a second.  I should note Durable Goods released earlier this week came in flat.

As we approach the final days of calendar Q3 we'll start getting earnings reports from America's top companies. As of right now it looks like we might have 6 quarters in a row with falling earnings for the S&P 500.  Excluding the battered energy sector earnings would have risen in 4 of the last 5 quarters. Here is an excerpt from the article.

Many of the factors pressuring U.S. corporate earnings in recent quarters—including a stronger dollar and falling oil prices—have abated in 2016. The WSJ Dollar Index, which measures the U.S. dollar against a basket of 16 currencies, is down 4% this year, versus up 8.6% for all of last year, and the price of U.S.-traded crude oil has risen 20% in 2016, rebounding from its extreme lows.

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