Wednesday, June 24, 2015
Stocks appear on track start today’s session modestly in the red on the back some lingering uncertainties about the Greece deal. The odds of a deal are still quite high, but the all-around optimism of the last two sessions may have been a bit premature.
European markets are reflecting some of the Greece-centric anxieties, with all the major national stock market indexes modestly down today after two days of solid gains. But Asian markets bucked this trend, with Japan’s Nikkei index making decent gains today and reaching its highest level since 1996. China’s Shanghai Composite Index and Hong Kong’s Hang Seng also ended today’s session higher.
The lingering doubts about the Greece deal pertain to parts of the last-minute proposal from the Greek government that leans more towards tax increases than spending cuts. While progress has reportedly been made in securing a new deal for the country ahead of the June 30th deadline, the IMF is believed to be dissatisfied with Greece’s higher tax proposals, as those will weigh on the economy’s long-term growth potential.
The last look at the Q1 GDP matched estimates, with growth in the U.S. economy coming in a little better than was reported earlier. Today’s report shows that Q1 GDP declined by -0.2%, up from the prior estimate of -0.7%. The positive revision reflects better consumer spending (+2.1% vs. +1.8%), housing investments (+4.9% vs. +3.6%) and less decline in non-residential fixed investments (-2% vs. -2.8%).
All in all, the takeaway from this report is that the U.S. economy was a tad bit stronger in Q1 than initially estimated, but nothing really material. Estimates for the current period are looking for growth getting back to the +2% to +2.5% range in Q2, indicating a weaker bounce-back relative to what we saw last year.
In corporate news, homebuilder Lennar (LEN) came out with better-than-expected results on 21% higher home deliveries and 18% gains in new orders from the year-earlier level. Housing data has been very strong lately, with this week’s new and existing home sales numbers for May coming in better than expected.
In other news, Netflix (NFLX) has announced a 7-for-1 stock split. The stock has been a stellar performer lately, almost doubling in the year-to-date period, with this stock split helping the momentum continue.
Sheraz Mian
Director of Research
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