Stocks were higher despite this morning’s third revision to first quarter GDP, which showed the economy contracted by 2.9% compared to the BEA’s prior estimate of -1.0%
First, the scoreboard
- Dow: 16,867.51, +49.4, (0.3%)
- S&P 500: 1,959.53, +9.5, (0.5%)
- Nasdaq: 4,379.76, +29.4, (0.7%)
And now, the top stories of the day:
- The Bureau of Economic Analysis’ third revision for Q1 GDP showed the economy contracted by 2.9%, worse than the 1.0% contraction that was estimated previously. The biggest culprit in the latest downward revision was healthcare spending, which went from adding 1.01% to subtracting 0.16% from the headline GDP number. Ian Shepherdson of Pantheon Macro noted that most all of the hit to consumption, which fell to +1.0% from +3.1%, was in healthcare services which saw spending cut to -1.4% from +9.1%. Shepherdson reiterated that the positive economic trend represented by recent data is still in tact. “Overall, the combination of weather, inventory unwind and health chaos make these data deeply unrepresentative of the trend; labour data and Q2 spending numbers so far are MUCH better.” BI’s Joe Weisenthal also argued that the Q1 GDP revision doesn’t matter, noting that this data is now months old and is not consistent with what we’ve recently seen from economic data.
- Markit released its U.S. services purchasing managers index — or PMI — report, which jumped to 61. 2 in June, up from 58.1 in May. Economists were expecting a reading of 58.0. Chris Williamson, chief economist at Markit said of the report, “A record high in the services PMI follows news from the flash manufacturing PMI that factory output grew in June at the fastest rate for just over four years. Combined, the two PMI surveys indicate that business activity is growing at the strongest rate seen since prior to the financial crisis.”
- U.S. durable goods orders fell 1% in May, worse than the flat reading economists were expecting. Excluding defence and aircraft, the report showed capital goods orders climbed 0.7%, beating expectations for a 0.5% rise. Ian Shepherdson of Pantheon Macro said the report’s details were much better than the headline. Shepherdson: “May durable goods orders fell 1.0%, below the consensus, 0.0%… All the headline drop is in the wildly volatile defence sector, down 31.4% after a 38.2% leap in April. Ex-defence, orders rose 0.6%. And the key number in the report — orders for non-defence capital equipment, ex-aircraft — rose 0.7%. Even if this is unch in June, the quarter as a whole will be up 10% annualized, the best since Q1 2013 and consistent with our view that small firms are starting to increase capex even as sluggish earnings growth holds back spending by larger companies. Note inventories up 1%, biggest gain since Dec. Overall, much better than the headline.”
- The Supreme Court ruled against Aereo, finding that the streaming service violates copyrights owned by TV broadcasters. Following the ruling, which reversed an earlier decision by a lower court, shares of cable-network companies — notably CBS, 21st Century Fox, and Disney — traded higher. Aereo’s CEO Chet Kanojia has said that the company had no plan B if it lost this case, and IAC chairman Barry Diller said “it’s over” for Aereo.
- Barnes & Noble announced that its board has approved the separation of its retail and Nook businesses. Barnes & Noble, which reported it sold just $US25 million worth of Nook hardware and accessories during the fourth quarter, saw its shares gain 5% following the announcement.
- Agricultural giant Monsanto gained more than 5% after its earnings beat expectations and it announced plans to repurchase $US10 billion worth of stock.
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