Wall Street Breakfast: Is It Here Yet?

Recession talk is all the rage, but the U.S. economy managed to eke out another gain in Q1, with GDP growth expanding by an annualized rate of 1.1%. That severely missed estimates of 2.0% growth and was slower than the 2.6% growth seen in Q4, but investors were excited nonetheless. In fact, the Dow (DJI) and S&P 500 (SP500) on Thursday notched their biggest gains since January, while the Nasdaq Composite (COMP.IND) scored its best winning session since March. What's going on? Many analysts and economists had predicted that a recession would already come in Q1, and while the U.S. economy is clearly shifting into a lower gear, the latest data may suggest that it also might be able to escape one in 2023. The numbers also support the case for the Fed to begin pausing its aggressive rate hike cycle, while consumer demand is still holding strong despite lower private inventories and residential fixed investment. Robust job growth has additionally outpaced layoffs, with the unemployment rate still at multi-decade lows, suggesting that Americans might be well-positioned to deal with inflation and economic uncertainty. "The 'R Word' that one should use when discussing the economy over the past two years should be resilient, not recession," wrote RSM chief economist Joseph Brusuelas. "The shocks of inflation and interest rate increases and a tightening in lending that are now affecting small and midsize businesses have yet to put a material dent in consumption. That strength is what is propping up overall economic activity as businesses have pulled back on both inventory accumulation and fixed investment." Outlook: Some contend that a rolling recession has been happening to different sectors of the economy, and could support a soft landing, while others are doubling down on a mild to moderate recession coming in the latter half of 2023. "The principal problem of inflation is the same as it has been since it was being dismissed as 'transitory' by Fed and Treasury officials: there is too much money in the economy," writes SA author J.G. Collins, giving separate portfolio advice to younger and older investors. Also keep an eye out today for personal consumption expenditures, the Fed's favorite inflation gauge. (130 comments)

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Top News Is it here yet? Getty Images Recession talk is all the rage, but the U.S. economy managed to eke out another gain in Q1, with GDP growth expanding by an annualized rate of 1.1%. That severely missed estimates of 2.0% growth and was slower than the 2.6% growth seen in Q4, but investors were excited nonetheless. In fact, the Dow (DJI) and S&P 500 (SP500) on Thursday notched their biggest gains since January, while the Nasdaq Composite (COMP.IND) scored its best winning session since March. What's going on? Many analysts and economists had predicted that a recession would already come in Q1, and while the U.S. economy is clearly shifting into a lower gear, the latest data may suggest that it also might be able to escape one in 2023. The numbers also support the case for the Fed to begin pausing its aggressive rate hike cycle, while consumer demand is still holding strong despite lower private inventories and residential fixed investment. Robust job growth has additionally outpaced layoffs, with the unemployment rate still at multi-decade lows, suggesting that Americans might be well-positioned to deal with inflation and economic uncertainty. "The 'R Word' that one should use when discussing the economy over the past two years should be resilient, not recession," wrote RSM chief economist Joseph Brusuelas. "The shocks of inflation and interest rate increases and a tightening in lending that are now affecting small and midsize businesses have yet to put a material dent in consumption. That strength is what is propping up overall economic activity as businesses have pulled back on both inventory accumulation and fixed investment." Outlook: Some contend that a rolling recession has been happening to different sectors of the economy, and could support a soft landing, while others are doubling down on a mild to moderate recession coming in the latter half of 2023. "The principal problem of inflation is the same as it has been since it was being dismissed as 'transitory' by Fed and Treasury officials: there is too much money in the economy," writes SA author J.G. Collins, giving separate portfolio advice to younger and older investors. Also keep an eye out today for personal consumption expenditures, the Fed's favorite inflation gauge. (130 comments)       Featured Get unmatched earnings coverage Earnings drive stock prices, leading to big gains and painful losses. After reporting its Q1 numbers, JP Morgan Chase (JPM) rallied +7% on record revenue and a 52% profit surge. If you want to get ahead of earnings and discover potential hits and misses, join Seeking Alpha Premium. You can pinpoint the most compelling opportunities with up-to-the-minute news and analysis. That's as well as 5,000+ earnings call transcripts. Get the edge you need to win. Gain access to Seeking Alpha Premium's unmatched earnings coverage - just $4.95 for your first month. Go Premium now * Introductory offer for new subscribers only. After 1 month, $239 charged automatically for an annual subscription. Auto-renews at the then current annual list price. Outlook Tech is back Most of the Big Tech earnings are now in, and WSB subscribers were correct in forecasting big gains for Microsoft (MSFT), which rose 8.5% after the bell on Tuesday. The biggest surprise was Meta Platforms (META), however, which eclipsed the advance of the Windows maker with a nearly 12% jump of its own during the following session. One of the big takeaways from the movement is just how much the industry has bolstered the market this year, with Wall Street indices yesterday recording their best day in months as tech stocks continue to dominate the landscape. Two months ago, we also asked WSB subscribers which S&P 500 sector will walk away with the biggest gain in 2023. So far, it seems like they were also right by a large margin. (10 comments)       Earnings The outlier Soaring nearly 12% AH on Thursday, Amazon (NASDAQ:AMZN) gave up all of its gains, and then some, with the stock ending the session down 2%. Triggering the initial move higher were strong quarterly profits, cost cuts and robust sales, but worries set in on the post-earnings conference call as executives gave somewhat of a cloudy outlook. While AWS only accounts for around 17% of Amazon's (AMZN) total revenue, the cloud segment is the engine driving its profitability, with the company's retail operations losing cash during each of the past six quarters. "There's no revenue problem here," writes SA contributor Bill Maurer, while Investing Group Leader Michael Wiggins De Oliveira says AWS is struggling to live up to expectations. (115 comments)       Financials Weekend announcement? The U.S. government is "coordinating urgent talks" to save First Republic Bank (NYSE:FRC) as "private-sector efforts led by the bank's advisers have yet to reach a deal." That's according to Reuters, which said the FDIC, Treasury Department and Federal Reserve are all involved, and seems to echo similar comments made by White House Press Secretary Karine Jean-Pierre. While the efforts may help bring more parties such as banks and private equity firms to the negotiating table, it's still unclear whether the U.S. government will ultimately participate in the rescue. On Monday, First Republic (FRC) revealed that deposit outflows totaled $70B in Q1, and put the spotlight on Wall Street institutions that deposited $30B at the bank on March 16 to stave off a regional banking crisis. (21 comments)       Today's Markets In Asia, Japan +1.4%. Hong Kong +0.3%. China +1.2%. India +0.8%. In Europe, at midday, London -0.3%. Paris -0.8%. Frankfurt -0.4%. Futures at 6:30, Dow -0.4%. S&P -0.4%. Nasdaq -0.3%. Crude +0.3% to $74.96. Gold -0.4% to $1991.60. Bitcoin +1.1% to $29,317. Ten-year Treasury Yield -6 bps to 3.47% Today's Economic Calendar 8:30 Personal Income and Outlays 8:30 Employment Cost Index 9:45 Chicago PMI 10:00 Consumer Sentiment 1:00 PM Baker Hughes Rig Count 3:00 PM Farm Prices Companies reporting earnings today » What else is happening... Four companies indirectly owned by Berkshire (BRK.B) file for bankruptcy. Intel (INTC) Q2 guidance suggests PC downturn is near end. Costs weigh on Pinterest (PINS) as investors focus on forecast. No better luck at Snap (SNAP) as revenue slumps worse than expected. Fed's Powell reportedly had call with Russians who posed as Zelenskyy. Industrials: Caterpillar's (CAT) reverses after reporting Q1 results. Comcast (CMCSA) beats estimates, Peacock subscriber base up 60%. Next layoffs: Dropbox (DBX) to cut global workforce by 16%. Cannabis stocks jump as bipartisan SAFE banking bill reintroduced. Big Oil on tap: Exxon (XOM) and Chevron (CVX) set to report. Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day.
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