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Real GDP growth for Q1 2016 was revised up to 0.8% from 0.5%. Additional data showed that the decrease in business investment, previously estimated at 3.5%, was smaller than forecasted, now revised to 2.6%. The trade deficit was narrower than previously thought with exports only falling 2% from the 2.6% earlier projected. Growth in consumer and government spending was maintained at 1.9% and 1.2% respectively.
New-home sales for April were extraordinary, coming in at 619,000, the highest since January 2008. Sales varied significantly by region. The Northeast, South, and West saw an increases of 50%, 15.8%, and 23.6% respectively while the Midwest declined 4.8%. The supply of new homes has not kept pace with sales. Despite the unusual reading, sequential changes in new-home sales have historically been volatile. Therefore, while the reading is noteworthy, inferring a trend requires more months of data.
Corporate profits dropped 3.6% in the first quarter YoY. However, profits rose a modest 1.9% from the fourth quarter. Financial corporations saw a decline of $2 billion in profits, whereas it was a decline of $24 billion in the fourth quarter. Non-financials saw an increase of $45.7 billion following a $129.2 billion decline last quarter. Corporate profits are after-tax profits and do not include inventory valuation or capital consumption adjustments.
Durable goods orders for April were mixed. Orders exceeded expectations with a monthly gain of 3.4%, owing largely to vehicle and commercial-aircraft orders. Other positive factors included a increase in shipments and improvement in the inventory-to-shipments ratio. However, business investment was a concern as orders of core capital goods declined 0.8% and have declined in the last 5 out of 6 reports.
On Tuesday’s news of an 8-year high in new-home sales, residential-construction companies rose 1.9%. Mohawk Industries (MHK ) jumped 2.3%, Lennar (LEN ) increased 3.9%, and D.R. Horton (DHI ) rocked 4.2%. Home improvement stores and home furnishing manufacturers showed strong gains as well. Whirlpool (WHR ) increased 4.4% and Home Depot (HD ) increased 1.5%.
Netflix (NFLX ) announced a deal with Disney (DIS ) to the exclusive rights of new movies from Disney, Marvel, LucasFilm, and Pixar beginning in September. Netflix shares rose 3.2% on the news. The deal puts pressure on rival pay-TV and streaming services such as HBO, Starz, Amazon Prime, and Hulu.
HP Enterprise (HPE ) announced a future sale of its business service unit to Computer Sciences (CSC ). Investors sent the stock up 6.8% on the news. HP Enterprise is expected to concentrate on selling hardware for servers, storage, and networking as well as specialized software.
Alibaba (BABA ) stated that US regulators have placed the company under an investigation of its accounting practices. The investigation includes an examination of logistics company Cainiao Network of which Alibaba owns a large stake. The stock was hammered, closing down 6.7%.
Tuesday May 31 — Personal Income and Outlays (a gauge of the consumer sector)
Wednesday June 1 — ISM Manufacturing Index (a gauge of the manufacturing sector)
Friday, June 3 — Employment Situation (a report on the state of the labor market)
|SoftBank Group (SFTBY) ||Medtronic (MDT) ||Box (BOX) ||Broadcom (AVGO) ||Sears Hometown (SHOS) |
|Klabin (KLBAY ||Workday (WDAY) ||Cracker Barrel (CBRL) ||Donaldson (DCI) ||Bridgford Foods (BRID) |