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Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour about even despite generally better than expected data. Since Monday the Standard and Poors 500 Index has gained 28 points or 1.2% while the NASDAQ is up 109 points or 1.8% despite continued equity outflows.

Durable Goods Orders fell a less than expected .7% in April on weakness in non-defense capital goods. The proxy for business spending non-defense capital goods ex-aircraft was unchanged again, with the 6-month average an anemic .43%.

First quarter Gross Domestic Product was revised up to 1.2% beating expectations on strength in fixed investment and consumer spending. Real disposable income increased 1.7% for the quarter, the saving rate rose to 5.2% but was revised down dramatically in the fourth quarter as was disposable personal income cut from +2% to -.3%. Other notable revisions include a sharp decline in corporate profits as they fell 1.9%, more than erasing the .5% gain seen in the previous quarter. The PCE Deflator or personal consumption expenditures index showed inflation of 2.4% in the first quarter slightly ahead of the Fed’s desired 2% target.

With the hard and soft economic data showing considerable divergence since the beginning of the year the GDP report shows that the hard data seems to have a better read on the economy. That said it appears that it is the Atlanta Fed’s GDPNow model that has the wildly optimistic estimate for the 2nd quarter at 3.7% followed by the New York Fed NowCast at a more realistic but still too high 2.2% based on current data.

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