Stocks are higher after first quarter GDP was revised sharply lower.
The Dow is up 27 points, the S&P 500 is up 4 points, and the Nasdaq is up 9 points.
This morning, the BEA’s final GDP revision showed the economy contracted by 2.9%, lower than its previous estimate of a 1% decline. Economists had been expecting a decline of 1.8%.
A reduction in healthcare spending was the main culprit for the downward revision.
Ian Shepherdson of Pantheon Macroeconomics said of the report, “Almost all of this huge hit is in the healthcare services component, cut to -1.4% from +9.1%.”
It’s a bad report, but with this data representing economic activity that is basically three months old, BI’s Joe Weisenthal argues that we really shouldn’t care about the bad report.
Not only is the GDP report old data, but it isn’t at all consistent with any other signals we’ve been getting from the economy. Neal Dutta of Renaissance Macro said of the report:
“If GDP were truly so weak, we would not expect aggregate hours worked to climb 3.7% annualized through May, jobless claims to remain near cycle lows, consumer confidence to hit a cycle high, industrial production to climb 5.0% at an annual rate over the first five months of the year, core capital goods orders to be up 5.8%, ISM to be above 55, and vehicles sales to hit their strongest annualized selling pace for the year.”
And following the GDP report, Markit’s U.S. services PMI jumped to 61.2 in June from 58.1 in May. This reading was also stronger than the 58.0 expected by economists.
Durable goods orders for May were also released, and showed that orders fell 1% over the prior month against expectations for a flat reading.
The Supreme Court ruled against Aereo, which allowed subscribers to stream live TV through internet-connected devices, reversing a lower court decision that found in favour of the company.
Following the ruling, shares of cable-network companies, including CBS, 21st Century Fox, and Disney, rallied sharply. Near midday, CBS shares were up more than 4%, while Fox and Disney were each up better than 1%.
In corporate news, Barnes & Noble announced plans to separate its retail and Nook businesses. Shares of the bookseller were up as much as 7% after the market open following the announcement.
Agricultural giant Monsanto reported earnings that beat expectations and announced a new $US10 billion share repurchase program, and shares of the company gained as much as 6% following the news.
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