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Q2 GDP Lands at 2.6%, 1st Read

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Friday, July 28th, 2017

The first look at Q2 Gross Domestic Product (GDP) growth — perhaps the main signifier of a growing economy — ratcheted up to 2.6%, putting the U.S. economy in 2017 pretty much exactly where we expected it: 2% growth (averaged in with the Q1 number). Consumer spending rose 2.8%, and business spending went up 5.2%. Part of this was in equipment sales, which grew 8.2%.

The Q2 employment cost index fell from 0.8% to 0.5%. Housing was down but government was up, with inventory positive. Also, revisions to 2015 showed that year up higher than originally reported, whereas 2016 was lower than first thought.

Basically, what can be gleaned at a quick glance is that, m while expectations are in-line with expectations, what this means is that small business confidence based on the election of President Trump last November has held up. Markets haven’t moved much since this latest GDP announcement: the S&P 500 has gone from -6.5 to -6, the Dow from -31 to -32 and the Nasdaq from -45.5 to -38.

Q2 Earnings Wrap-Up

Pharmaceuticals maker Merck (MRK - Free Report) posted better-than-expected Q2 earnings, reporting $1.01 per share as opposed to the 87 cents anticipated by the Zacks consensus estimate. Revenues also topped expectations at $9.93 billion, aheads of the $9.79 billion we had been looking for. Its high-growth melanoma treatment Keytruda outperformed estimates in the quarter. This marks 51% growth sequentially and 180% year over year for the Zacks Rank #2 (Buy) company.

American Airlines (AAL - Free Report) also topped expectations on its bottom line, reporting g $1.92 per share compared with the $1.87 expected. This is currently a Zacks Rank #1 (Strong Buy) stock, and revenues also beat the Zacks consensus, bringing in $11.1 billion, representing 7.2% growth year over year. A $500 million share buyback and 10 cent dividend increase helped put the cap on a successful Q2 for AAL.

Exxon Mobil (XOM - Free Report) missed expectations in its Q2 earnings, reporting 78 cents per share as opposed to the 83 cents expected. Revenues beat the Zacks consensus, however, reporting $62.88 billion as opposed to the $61.16 billion there Zacks consensus was calling for. Overall production was in-line with year-ago figures, and natural gas production was up 2% for the Zacks Rank #4 (Sell) company.

Tesla Model 3 on the Way

Finally, the first deliveries of Tesla’s (TSLA - Free Report) Model 3 cars — the company’s first “affordable” electric-only automobile — occur today, satisfying roughly 350K individuals who had put down $1000 each to reserve their place in line for one of the first Model 3s. Regarding the author sales business of the widely spreading energy conscious company, the Model 3 looks to bring the Tesla brands to a garage in every neighborhood in America (and elsewhere).

Mark Vickery
Senior Editor

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