EmailThe S&P futures are down just one point and are trading slightly below fair value. That indication suggests the cash market will start the day on a flattish note.
Just about every pre-market report is ascribing the softness to the disappointing earnings reports and guidance from Apple (AAPL) and Amazon.com (AMZN). The only thing is that both AAPL and AMZN are trading higher in pre-market action.
A number of analysts have come to the defense of both companies. That appears to be mitigating the impact of the headline disappointment along with the recognition that both companies are still seeing strong demand for their products/services, even if it is not quite as strong as analysts previously modeled. To wit, guidance from Apple and Amazon suggests revenues in the December quarter will be up approximately 12% and 24%, respectively.
Neither company had what could be called a stellar report, but the added realization that AAPL and AMZN had dropped 13% and 15%, respectively, since September 19 fits with the thinking that their relatively disappointing reports was priced in already.
Coincidentally, we have seen the S&P futures rebound from overnight lows (-12 points) as these stocks have bounced in pre-market action.
Even so, the understanding that these shining knights showed some chinks in their armor serves as a telling reminder that the economic and earnings environment is less than ideal.
That last point is encapsulated in today's release of the advance Q3 GDP report, which showed output increasing at an annual rate of 2.0%. That is up from 1.3% in the second quarter and is slightly ahead of the Briefing.com consensus forecast of 1.9%.
Third quarter growth was paced by positive contributions from personal consumption expenditures (1.42 percentage points), federal government spending (0.72 pp), and residential fixed investment (0.33 pp). Increases there were partly offset by negative contributions from exports (-0.18 pp), nonresidential fixed investment (-0.13 pp), and private inventory investment (-0.12).
Real final sales, which excludes the change in inventories, increased 2.1%.
Led by a 13% increase in defense spending, federal spending rose 9.6% in the third quarter. The strength there was a surprise (federal spending had declined in the four previous quarters) and offset a 0.1% drop in state and local government spending.
The GDP deflator was up 2.8% after a 1.6% increase in the second quarter.
The S&P futures continued their recovery effort after the GDP report on what can be labeled a relief bid -- relief that Q3 GDP wasn't worse than expected and relief that the reports from Apple and Amazon.com have not undermined market sentiment further.
