Markets struggle for an advance after GDP growth data

Dow lost 20, decliners over advancers 5-4 & NAZ retreated 48.  The MLP index was off slightly to 280 after yesterday's gains & the REIT index fell 2+ to the 349s.  Junk bond funds were off a tad & Treasuries inched higher.  Oil slid lower in the 69s & gold was off 1 to 1224.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

69.67

+0.06

+0.1%

GC=F

Gold

1,224.10

-1.60

-0.1%

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US GDP advanced by 4.1% in Q2, the fastest pace of economic expansion since 2014 – when Q3 growth reached a 5.2% rate.  After the GDP was released Pres Trump tweeted, "Great GDP numbers just released."  The Trump administration has implemented pro-growth policies, including a sweeping tax reform package meant to bolster businesses.  The last time annual GDP growth was above 3% was in 2005 when it came in at 3.3%.  George Bush was pres when the US economy hit this growth rate.  The best annual GDP reading under Pres Obama was 2.9%.  GDP is a measure of a country's economic output & is made up of personal consumption, business investment, gov spending & the difference between exports & imports.  Economic growth depends a lot on how consumers & businesses feel about the economy.  When individuals are positive about their finances they are more likely to spend & the same goes for businesses.  Tax reform was meant to boost both individuals & businesses, lowering the corp tax rates to increase the money businesses have to invest in growth while also increasing take home pay for many Americans.  The latest GDP reading suggests that this strategy is working.

US economy accelerates at fastest pace in almost 4 years

Stocks were flat as investors digested the first reading on Q2 GDP & the latest quarterly earnings reports.  The economy expanded at a robust 4.1% rate in Q2, the fastest pace in almost 4 years driven by a pickup in consumer spending plus a surge in soybean exports ahead of tariffs.  The Q1 GDP reading was also revised to 2.2% up from 2%.  Meanwhile, the Dow was under pressure after Chevron (CVX, a Dividend Aristocrat) & ExxonMobil (XOM, a Dividend Aristocrat) missed Q2 earnings targets.  Amazon (AMZN) reported blowout earnings, helping the tech sector, that took a hit after Facebook’s (FB) disappointing forecast.  Another social media company, Twitter (TWTR), released quarterly results were just released & shares fell as the company forecast for a decline in monthly active users.  TWTR has been moving to purge fake accounts as social media companies have come under scrutiny following Facebook’s (FB) Cambridge Analytica data use scandal.  About ½ of the companies in the S&P 500 have reported quarterly numbers & so far the results are well ahead of expectations.  Earnings at this point are up 22.1% from last year's qtr, surpassing the 20.5% increase that was forecast.

US stocks open flat as energy share sell-off overshadows GDP

US consumer sentiment slipped to 97.9 in Jul, remaining capped by rising fears over the repercussions of escalating tariffs.  Still, the index remained above expectations.  Consumer sentiment was expected to drop to 97.1 in the final reading of Jul from 98.2 in Jun.  Chief Economist for The Univ of Mich survey Richard Curtin said that consumers were worried about the impact of tariffs on the domestic economy, writing that an end to the trade war would be necessary to encourage consumers to participate in the economy.  "Resolution is critical to forestall decreases in consumer discretionary spending as a precaution against a worsening economy," he wrote.  Despite marginal gains in Jun, the index has slumped since Mar when it reached its highest level since 2004 with a reading of 101.4.  The sluggish trend has been fed by months of uneasiness around the tit-for-tat tariff dispute between the US & the world's largest economies.  The survey considers 500 consumers' outlook on economic prospects, accounting for sentiment on personal finances, inflation, unemployment, gov policies & interest rates.  Still, the Commerce Dept reported that gross domestic product grew 4.1% in Q2, its best pace since 2014, as a result of a rise in consumer & business spending.  Tariffs coupled with massive tax cuts last year helped boost economic growth.

Consumer sentiment slips in July, hampered by concerns over trade dispute

Amazon (AMZN) reported Q2 profit that handily beat expectations, as growth in online shopping & cloud-computing gains continued to lift the e-commerce giant.  The company had EPS of $5.07, more than double estimate of $2.50.  Revenue surged 39% to $52.9B, slightly below the consensus estimate of $53.4B.  The company has benefited from an expanded footprint in cloud-computing services, as well as the addition of Whole Foods, acquired last year.  Amazon Web Services recorded $6.1B in revenue, a 49% increase, during Q2.  Revenue from physical stores, including Whole Foods, reached $4.31B.  The stock jumped up 43 (2%).

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Amazon profit soars, doubling Wall Street's estimate

The stock averages are fluctuating around breakeven today.  Economic data & earnings were decent, although GDP data was pretty well leaked earlier.  However uncertainties over where higher tariffs will go & how they will affect business are holding back investors on making new commitments.  And they show no sign of going away soon.  The Dow is around the 25½K area & will need more good news to advance.

Dow Jones Industrials