Originally published by Rivkin Securities
The top 30 US Blue Chip stocks, as contained in the Dow Jones Industrial Average, have extended their gains overnight with a 0.44% gain while the largest ‘tech’ index, the Nasdaq 100, fell sharply, losing 1.44%. This represents an unusually large divergence in performance between these two indices and was largely caused by a large fall in the Facebook (NASDAQ:FB) share price. FB closed down $41 (19%) as investors were spooked by weaker than expected growth in the June quarter of this year. As at the cash close, the losses in FB were compounded by a 3% decline in Amazon (NASDAQ:AMZN) stock although this was reversed in after hours trading following the release of its quarterly report. Amazon's earnings, profit margins and sales all grew strongly year over year even if sales were slightly below wall street expectations.
The first estimate of US second quarter GDP will be released tonight. According to the Atlanta Fed GDPNow model, the number should come in at 3.8%, a strong growth rate even if it is below the 4.5% it was forecasting just a few days ago. This would represent a significant improvement over the first quarter GDP of just 2.0%. If confirmed, a 3.8% growth rate would signal a continuation of the gradual economic recovery that the US has been undergoing for several years now. Strong GDP figures would also give the Federal Reserve the confidence to continue on its path of rate hikes. As of today, the market is pricing an 87.5% chance of a 25 basis point rate hike at its September meeting.
The ASX 200 has continued to trade weakly although it managed to bounce off the lows yesterday and close unchanged. Futures are up 27 points this morning.
Data Releases:
- US Advance GDP 10:30pm AEST