Morning Report: GDP revised upward 5/26/17

Vital Statistics:

Last Change
S&P Futures 2410.5 -3.0
Eurostoxx Index 380.9 -1.3
Oil (WTI) 48.8 -0.2
US dollar index 88.8  
10 Year Govt Bond Yield 2.24%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4

Stocks are lower this morning on no real news. Bonds and MBS are flat.

Today looks to be a relatively slow day ahead of the 3 day weekend. Markets should become illiquid in the afternoon as most of the Street will be on the LIE by noon.

First quarter GDP was revised upward from 0.7% to 1.2% in the second revision. Consumption was revised upward from 0.3% to 0.6% and PCE inflation was revised downward from 2.3% to 2.2%. The upward revision to GDP was higher than expected. The current tracking estimate for Q2 is around 3%.

Durable Goods orders fell in April by 0.7%. The core index, which excludes volatile transportation components fell 0.4%. Capital Goods expenditures were flat.

Corporate profits rose 12% YOY in the first quarter. For all of the handwringing over stock market valuations, the underlying profitability of Corporate America remains strong.

After this morning’s data, the implied probability of a June hike increased 4% to 87%.

Larry Summers is sticking with his “secular stagnation” thesis. He views secular stagnation as the defining economic issue of our times, and believes that governments aren’t doing enough fiscally to break out of it. He does raise a good point about the early 2000s: We had a huge trade deficit, tax cuts, super-easy credit, mid single digit unemployment, and a housing bubble. Yet all the economy could manage was adequate growth. With all of that stimulus, the economy should have been roaring like the late 90s. What is causing secular stagnation is anyone’s guess, but his Rx is infrastructure spending and fiscal stimulus.

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