It was another day of wild gyrations on Thursday as investors dealt with a combination of good news and increasing anxieties. Bond yields continue to edge higher, and the Street is grappling with the notion of the Fed becoming more aggressive than advertised coming into 2018.
The major indices were mixed:
- Dow: +37
- S&P 500: -1.8
- NASDAQ: -25.6
The Russell 2000 found buyers at a critical support point, holding the trend line that began when the index rebounded off a double bottom. It’s been a curious time for the Russell 2000 Index, which is what many consider the best proxy for the domestic economy. The index is also loaded with a lot of biotech stocks that have been hot, too.
The Economy
Earnings are coming in very strong and guidance while typically cautious bodes well for the market and speaks to a strong underlying economy.
Another round of strong economic numbers in manufacturing and construction got the folks at the Atlanta Fed to hike their first-quarter Gross Domestic Product (GDP) estimate to 5.4% from 4.2%. This would be remarkable as the fourth-quarter 2017 has been revised closer to 3.0%.
The U.S. economy has only pierced 5% in two quarters since the onset of the Great Recession. This is certainly shaping up to be the best string of quarterly GDP numbers in a long time.
State of the Consumer
Yesterday, Lowe’s (LOW) joined the chorus of companies doling out goodies because of tax cuts, and a lot of that cash will go straight into the economy.
Before the open, MasterCard (MA) posted strong results, in part to the continued use of credit cards in the United States. I understand that some see this as a red flag, but I think it’s a gauge of confidence at the moment. Back in 2005, credit card usage outpaced debit cards by a 160% margin, but the Great Recession got people to spend what they had in the bank, sending debit card usage ahead.
That lead is narrowing, as folks are earning more and have more faith in the economy, which also means that folks are buying bigger-ticket items.
Speaking of big-ticket items; after the bell, Apple (AAPL) posted its results: $88.3 billion revenue and $3.89 earnings per share, both better than expected.
Although iPhone sales of 77 million were short of consensus, the average selling price of $796 was more than a $100 above a year ago, and much better than analysts anticipated.
It seems as though folks are forking over $1,000 for those iPhone X Smartphones.
Also, after the bell, Amazon (AMZN) blew away the Street with $60.4 billion in revenue, +38% year-over-year. The stock took a $50 hit during the session, but there is a great chance the stock will make that up today.
Finally, speaking of the consumer, shares of Deckers Outdoor Corp (DECK) surged after posting earnings that blew away the Street as well.