Market Alert - Pre-Market

Futures vs FV: SP +10.00; DJ +39.21; NASDAQ +38.95

Futures are off their highs after rising all morning then a disappointing GDP that really shows very good economic activity, just underreported because the way GDP is calculated. Anticipating this lays the foundation for a GDP surge in 2018.

GDP: 2.6% VS 2.9% EXP VS 3.2% Q3.

Why the miss? Several reasons that are not bad.
1. Imports surged, subtracting 1.96% from the final GDP # (4.5% without it). And what do you know about imports? When the US consumer is doing well, he/she buys a LOT of foreign goods. That is occurring.

2. Inventories fell sharply: Subtracted 0.67 from final GDP number. Lots and lots of sales drained inventories, and they are being rebuilt right now.

3. Is the consumer strong as imports suggest? Yes. At 3.8% (2.2% prior), consumer spending was the best since 2016.

So, if you don't subtract imports, which should not be if GDP is going to be used as how they want to use it, i.e. a barometer of the US economic health, and if producers were not caught short by not manufacturing enough products, you have 5+% GDP, matching a lot of higher expectations that were generated based upon overall US economic activity. thus, those forecasts were accurate in economic activity growth, just not the pure US production and consumption.


Durables orders, Dec: 2.9% vs 0.9% exp vs 1.7 prior (from 1.3). Nearly all aircraft, however.


Trump in Davos: America first does not mean America alone.


Mnuchin: A strong dollar policy is in the country's best interest.


Beats: HON, INTC, WDC

Misses: CL (TL); SBUX (TL)


Jobs: FedEx adding $3.2B to wages. And another company, escaping me right now, is jumping up its 401K matching. Awesome . . . for 'crumbs.'


OTHER MARKETS
Bonds: 2.64% vs 2.627%

EUR/USD: 1.2424 vs 1.2417

USD/JPY: 109.39 vs 109.40

Oil: 65.56, +0.05

Gold: 1350.70, -12.20


Okay, futures are up but flat the past three hours. Lots of news to digest, stocks set to put in another upside week.

Any buying today? If they show good moves from solid patterns. We would prefer to let the likes of NVDA, CRM and others set up some more new buys and pick them up next week.

Of interest is whether SOX recovers and whether the early gains can hold.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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