GDP report provides boost to stocks, but higher oil prices could keep gains to a minimum. Tropical Storm Gustav is getting plenty of attention as the storm heads toward the Gulf Coast, bringing back memories of Hurricane Katrina. Retailer stocks Sears (SHLD) and Tiffany (TIF) reported mixed earnings and auto makers could suffer Thursday following bearish comments from Toyota (TM). The major market indices have been consolidating the past few weeks, which has created a descending triangle on the Dow ($INDU).
Second quarter GDP was revised higher to growth of 3.3 percent from the initial 1.9 percent. This was much stronger than estimates for a revision to 2.7 percent. Upward revisions to exports and durables consumption were the major reason for stronger growth. The GDP price index was revised slightly higher to 1.2 percent, but the core PCE remained at 2.1 percent. This is good news, but Fed leaders have stated that they expect growth to ease in the third quarter and heading into 2009.
Oil prices moved above $120 this morning on concerns about Tropical Storm Gustav. The storm is heading toward the Gulf Coast and is expected to intensify to possible a level 3 hurricane. Not only does this impact crude prices, but it raises concerns about how the storm might impact the area hit by Hurricane Katrina three years ago.
In earnings news, Sears reported that revenues fell for the fourth straight quarter. Same store sales fell 6.7 percent and earnings fell 82 percent from the year ago period. EPS came in at 21-cents, missing estimates substantially with analysts looking for profits of 33-cents. Ironically, the stock is up nearly two percent in early trading at $88.50. However, the stock is down sharply from its 52-week high of $152.91.
Shares of TIF are up nearly 10 percent after the high end retailer reported strong earnings. TIF profits nearly doubled and the company raised its outlook for the year. Despite strong gains this morning, TIF shares are trading $14 below their 52-week high with the stock near $43.50 in early trading.
It is no secret that domestic car makers have really struggled due to high energy prices and a tough economy. However, foreign car makers are struggling as well with TM cutting its sales forecast. The company noted that demand for large vehicles has hurt its outlook with TM now seeing sales of 9.7 million vehicles in 2009, down from prior forecasts for 10.4 million. TM shares are down about 1.5 percent to $88.
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