The stock market gapped up but quickly faded in early trading. The Dow is currently down 20 points and the SPX is down .2%. Transports, retailers, and biotechs are up a bit. On the other hand, gold miners, semiconductors, and utilities are sharply lower. Commodities are trading mostly lower as well this morning. WTI crude oil is down about .9% to trade around $58.90/barrel. Gold is down about 1% today, and it’s roughly flat for the year. Iron ore is down slightly, giving back some of its massive games so far in 2019. Bonds are mostly unchanged today, with the exception of junk bonds (+.1%). The 10 year Treasury note yield is hovering around 2.39%.

US economic growth (“GDP”) was revised slightly lower for the fourth quarter of 2018. The economy grew 3.0% from year ago levels. Estimates for consumer spending, government spending, non-residential fixed investment and inflation were revised slightly lower. It’s clear momentum slowed late the year, partly due to the government shutdown. As an aside, you won’t see 3% quoted in the news media, because of a strange convention whereby GDP growth is usually measured on a quarter-over-quarter, annualized basis. On this basis, fourth quarter GDP growth was revised down to 2.2%, from the initial estimate of 2.6%. Either way, The US economy grew 2.9% in 2018, coming very close to the Trump administration’s 3% goal. For a number of reasons that I’ve belabored in this blog, economic growth is stepping down to a lower rate this year. In fact, it looks like GDP is tracking to about 1.5% growth in the first quarter 2019. This is precisely why the federal reserve paused it’s interest rate hikes. Most economists, however, expect the economy to reaccelerate in the last half of the year. In fact, both Bloomberg and the federal reserve project 2.4% growth for the year.

Pending home sales (contracts signed) fell 5% in February from year-ago levels. Economists were expecting a more moderate 3% decline. The housing market is going through an adjustment period as home prices have become elevated and the supply of for-sale homes has been persistently low. Two very positive factors, however, or helping prop up housing: low unemployment, and falling mortgage rates. In fact, we learned today that the volume of new applications for unemployment insurance fell back to a two-month low. And says the national average 30-year fixed mortgage rate is back to 4.06%.

Lululemon (LULU), Accenture (ACN), Movado Group (MOV), and PVH Corp (PVH) all reported quarterly revenue and earnings that exceeded Wall Street forecasts. In addition, they all offered strong forward earnings guidance. Accenture said businesses are investing heavily in cloud software. The other companies are directly exposed to consumer spending, and Lululemon said strong holiday season momentum has carried into 2019. It’s hard to get too negative on the economy when companies are reporting strong results.

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