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Bifurcated Markets See Q1 GDP +1.3%, Jobless Claims Lower

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Thursday, May 25th, 2023

We see a real market bifurcation this morning, whereby the Dow looks to open down this morning by -75 points, while the tech-heavy Nasdaq appears to be off in the other direction: +300 points at this hour. Wednesday earnings after the bell — particularly NVIDIA (NVDA - Free Report) and Splunk — has set the Nasdaq on a relatively torrid pace higher, while the Dow feels the economic lags among blue chips. The S&P 500 splits the difference: +30 points at this hour.

The first revision on Q1 Gross Domestic Product (GDP) bumped up 20 basis points (bps) from expectations and the initial read to +1.3%. This is exactly half of Q4’s final print of +2.6%, and well off the multi-year high posted in Q4 2021 of +7.0%. Consumption reached +3.8% year over year, up 10 bps and the strongest read since Q2 2021; quarter over quarter reached +5.0%, 10 bps hotter again and off the Q2 ’21 high 6%. Pricing Index of +4.2% was 20 bps hotter month over month, well off the 40-year-high +9.0% in Q2 ’22.

Initial Jobless Claims came in well below expectations to 229K last week, off the 245K estimate, but north of the big downward revision for the previous week of 225K. This is the lowest print since the last week in March, which brought a headline of 228K. In short, the domestic labor market remains healthy; true, we’re off the sub-200K range we’d seen throughout much of the Great Reopening, but this far below 250K can only be seen as stronger than expected.

Continuing Claims of 1.794 million marks the second straight week sub 1.8 million (following the previous week’s unrevised 1.799 million), after eight weeks above 1.8 million. There’s no real psychological significance to a 1.8 million longer jobless claims level other than near-term relativity; in actuality, anything sub-2 million can be considered a good labor market. And, of course, stronger employment figures puts another notch in the “Fed’s not done raising interest rates” column for its next meeting on June 13-14.

Here’s a quick run-down of retail earnings this morning: Best Buy (BBY - Free Report) topped earnings estimates and reaffirmed full-year guidance, even as quarterly sales missed expectations and Digital sales fell -12%; shares are up +4.8% on the news. Dollar Tree (DLTR - Free Report) shares are down -13% on short guidance, even as the company said it expects earnings to the “back-end loaded” this year. Luxury retailer Ralph Lauren (RL - Free Report) shares are up more than +5% on a beat on both top and bottom lines, as its International businesses was strong in the quarter.

For more on BBY’s earnings, click here.
For more on DLTR’s earnings, click here.
For more on RL’s earnings, click here.

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