Trader Talk

But Can You Trust These Numbers?


Futures drop on GDP; can "preliminary" numbers really be trusted? Good news! The decline in second quarter GDP was better than expected (down 1 percent). It's the fourth drop in a row (the longest since quarterly records began in 1947).

  • GDP Falls 1.0% in Sign that Recession is Slowing Down

So why did S&P futures drop about 5 points on the news? While there might be some "sell on the news" factors, some numbers (personal consumption) were disappointing, and revisions were especially noteworthy. The first quarter was revised downward, to 6.4 percent from 5.5 percent. Most of the other numbers for the first quarter were also revised downward, so how good are these "preliminary" numbers?


1) Summer rally!! The markets have turned up the heat in July, the S&P 500 rallying 12 percent from this month's lows and nearly 46 percent since hitting their multi-year lows back in March. The Dow is on pace for its best month since October 2002, while the S&P and Nasdaq are poised for a rare 5-month winning streak - something that hasn't been done since 2007 for the S&P and 2003 for the Nasdaq.

2) Dow component Walt Disney is down 3 percent pre-open. Although the entertainment firm beat estimates by a couple of pennies, cost cuts were primarily driving the upside surprise. Revenues fell 7 percent, missing estimates on poor DVD sales and lower ad revenues at ESPN and ABC. While theme park attendance was up 3 percent, aggressive discounts causes theme park revenues to fall 9 percent from last year. More disconcerting is that Q4 bookings are down 7 percent from a year ago.

4) Las Vegas Sands falls 9 percent pre-open. The casino operator beat estimates, turning in a slight profit ex-items (up $0.01 vs. down $0.01 est.), as reduced costs helped boost results. Revenues were down 5 percent, missing estimates, on demand weakness as occupancy dropped at its Las Vegas casino hotels. The company saw large double-digit declines in RevPar in Las Vegas, falling 25 percent at The Venetian

5) Autonation down 2 percent pre-open, reported earnings slightly better than expected, but key sales metrics were disappointing or below analyst expectations, including total sales (down 28.8 percent year over year), new vehicle sales (down 35.3 percent), and especially used vehicle sales (down 27.1 percent, well below most analyst estimates).

6) Chevron's earnings were below expectations ($0.87 vs. $0.95 expected)--upstream was well below last year, and downstream actually LOST money.



Questions?  Comments?