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Gee What Went...Wrong?

The Street consensus was expecting a decline of 5.5 percent for the GDP, but most were anticipating the number would have a "6" handle on it, given how awful the other economic numbers had been.

Down 3.8 percent is a big miss...on the upside. Still the biggest contraction since the first quarter of 1982.

Futures rallied 8 points immediately.

Elsewhere:

1) Exxon reported earnings above expectations ($1.55 vs. $1.45 analyst consensus; they earned $2.13 last year in the same quarter). Remember the paradox about Exxon and other big oil companies: while the downstream business (refining) is a far bigger percentage of sales vs. upstream (oil production), it's the upstream part of the business that is far more profitable. Roughly 70 percent of the profits are from upstream, in fact.

Upstream earnings were down almost 25 percent compared to the same period last year, due to lower price, while downstream was up a bit due to better margins. Chemical production (a separate division) was far lower than last year due to lower demand.

One piece of good news: corporate bond issuance has been coming at a record rate this week...one trader noted that 10 deals were done yesterday totaling $15.9 billion.

2) Same with Chevron : 60 percent of the profits are from upstream, but upstream profits were well below last year's while downstream improved.

3) Procter & Gamble made its own estimates of earnings guidance for the second quarter--barely. Not hard to figure out what the issue is: a weak consumer is leading to weak volumes and difficulty raising prices.

They reported earnings of $1.58, versus their December guidance of $1.58 to 1.63. Full year 2009 guidance of $4.20 to $4.35 is slightly below prior guidance of $4.28-4.38 and about in-line with analyst expectations of $4.29.

4) Mexico's Cemex down 20 percent pre-open, posted its first quarterly loss in a decade on lower demand for building products worldwide. U.S. sales were down 32 percent.

5) Simon Property Group said they would pay their dividend of $0.90, however only about 10 percent will be paid in cash, the rest in stock. Simon is a real estate investment trust (REIT), a stock company that owns and operates real estate (shopping malls, in this case) on behalf of their investors. REITs have to pay out at least 90 per cent of their distributable income to unit holders to enjoy tax transparency on the amount that they pay out.

    • GDP Falls 3.8 Percent; Drop is Less Than Expectations

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