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The hotly anticipated Q2 Gross Domestic Product (GDP) headline has hit the tape ahead of Friday’s opening bell, and the results are very good (but not “great”): 4.1% in the first read, subject to revisions in future months. This is down from the consensus estimate that had been creeping up in recent days and weeks — the overall estimate had been expected a tick or two higher, with some forecasting a 5-handle, which we haven’t seen in the U.S. economy since Q3 of 2014.
An upwardly revised Q1 GDP, from 2.0% to 2.2%, adds a little sweetener to this morning’s numbers, though market futures look to have dampened on the news. But 4.1% is still the strongest GDP read we’ve seen in four years, so there’s very little to despair about this morning.
Beneath the headlines, we saw 4% growth in Personal Consumption, which is far stronger than the 0.5% we saw in Q1 and may be directly attributable to the massive tax cuts we saw at the end of calendar 2017. The 3% read on the Price Index is a full percentage point hotter than the previous quarter, although Personal Consumption Expenditures (PCE) actually fell quarter over quarter, to 2.0% from 2.2% last time around.
Business Investment was a disappointment in the quarter: 7.3% isn’t terrible, but compared to Q1’s 11.5% growth and the gigantic cash windfall from the tax cuts were expected to have spurred this a bit higher for the quarter. Inventories fell in the quarter, as well, which is also a bit of a surprise (though Inventory growth is the least-desirable segment of GDP). There was also a surge in Exports for Q2 to 9.3%, though some may see this as a pull-forward in order to avoid agriculture tariffs on things like soybeans, which are expected to feel the effects of global trade tensions (especially with regard to China) in coming quarters.
Therein lies the reason some were looking for 5% GDP in the quarter — as a sort of ratcheting up ahead of tariffs hitting productivity going forward. We still may see pullbacks as the year progresses, though we also may see an upward revision to Q2 GDP in future reads.
Currently, we do not expect these numbers to hold any sort of sway with the Fed regarding interest rate policy; there remains a greater than 90% chance the Fed funds rate will climb another quarter-point higher at its September meeting, to a range of 2.00-2.25% — with no clear indication a fourth interest rate hike will occur at the end of the year. In this respect, we may consider this 4.1% headline GDP number to be in Goldilocks territory (not too hot, not too cold).
For Q2 earnings this morning, ExxonMobil (XOM - Free Report) posted a mixed quarterly report, posting 92 cents per share which missed expectations of $1.26, while outperforming on the top line to $73.5 billion in revenues from the $70.3 billion in the Zacks consensus. Shares are falling in pre-market activity following the earnings release. For more on XOM’s earnings, click here.
Similarly, Exxon competitor Chevron Corp. (CVX - Free Report) also beat on the top line while missing on the bottom — $1.78 per share was beneath the $2.06 anticipated, while $42.24 billion outpaced the $40.78 billion in sales analysts were looking for. What this says about both integrated oil & gas “super-majors” is that costs have risen, even as the price of oil has climbed to assist higher revenue figures. For more on CVX’s earnings, click here.
Zacks Rank #1 (Strong Buy)-rated Twitter met expectations of 17 cents per share on better-than-expected revenues of $711 million, which surged past the $700 million in the Zacks consensus. Monthly Active Users (MAU) of 335 million was actually lower than analysts had been anticipating. As a result, pre-market trading of Twitter shares have sent the stock down double digits. For more on TWTR’s earnings, click here.
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Q2 GDP 4.1% Highest in 16 Quarters
Friday, July 27, 2018
The hotly anticipated Q2 Gross Domestic Product (GDP) headline has hit the tape ahead of Friday’s opening bell, and the results are very good (but not “great”): 4.1% in the first read, subject to revisions in future months. This is down from the consensus estimate that had been creeping up in recent days and weeks — the overall estimate had been expected a tick or two higher, with some forecasting a 5-handle, which we haven’t seen in the U.S. economy since Q3 of 2014.
An upwardly revised Q1 GDP, from 2.0% to 2.2%, adds a little sweetener to this morning’s numbers, though market futures look to have dampened on the news. But 4.1% is still the strongest GDP read we’ve seen in four years, so there’s very little to despair about this morning.
Beneath the headlines, we saw 4% growth in Personal Consumption, which is far stronger than the 0.5% we saw in Q1 and may be directly attributable to the massive tax cuts we saw at the end of calendar 2017. The 3% read on the Price Index is a full percentage point hotter than the previous quarter, although Personal Consumption Expenditures (PCE) actually fell quarter over quarter, to 2.0% from 2.2% last time around.
Business Investment was a disappointment in the quarter: 7.3% isn’t terrible, but compared to Q1’s 11.5% growth and the gigantic cash windfall from the tax cuts were expected to have spurred this a bit higher for the quarter. Inventories fell in the quarter, as well, which is also a bit of a surprise (though Inventory growth is the least-desirable segment of GDP). There was also a surge in Exports for Q2 to 9.3%, though some may see this as a pull-forward in order to avoid agriculture tariffs on things like soybeans, which are expected to feel the effects of global trade tensions (especially with regard to China) in coming quarters.
Therein lies the reason some were looking for 5% GDP in the quarter — as a sort of ratcheting up ahead of tariffs hitting productivity going forward. We still may see pullbacks as the year progresses, though we also may see an upward revision to Q2 GDP in future reads.
Currently, we do not expect these numbers to hold any sort of sway with the Fed regarding interest rate policy; there remains a greater than 90% chance the Fed funds rate will climb another quarter-point higher at its September meeting, to a range of 2.00-2.25% — with no clear indication a fourth interest rate hike will occur at the end of the year. In this respect, we may consider this 4.1% headline GDP number to be in Goldilocks territory (not too hot, not too cold).
For Q2 earnings this morning, ExxonMobil (XOM - Free Report) posted a mixed quarterly report, posting 92 cents per share which missed expectations of $1.26, while outperforming on the top line to $73.5 billion in revenues from the $70.3 billion in the Zacks consensus. Shares are falling in pre-market activity following the earnings release. For more on XOM’s earnings, click here.
Similarly, Exxon competitor Chevron Corp. (CVX - Free Report) also beat on the top line while missing on the bottom — $1.78 per share was beneath the $2.06 anticipated, while $42.24 billion outpaced the $40.78 billion in sales analysts were looking for. What this says about both integrated oil & gas “super-majors” is that costs have risen, even as the price of oil has climbed to assist higher revenue figures. For more on CVX’s earnings, click here.
Zacks Rank #1 (Strong Buy)-rated Twitter met expectations of 17 cents per share on better-than-expected revenues of $711 million, which surged past the $700 million in the Zacks consensus. Monthly Active Users (MAU) of 335 million was actually lower than analysts had been anticipating. As a result, pre-market trading of Twitter shares have sent the stock down double digits. For more on TWTR’s earnings, click here.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>