Don't panic – they did this Friday morning in their conference call and no once cared, with JPM saying:
We are revising down our estimate for Q2 real annualized GDP growth from 2.0% to 1.0%, and revising up our projection for Q3 growth from 2.0% to 2.5%. We came into this week tracking a little light on our second quarter estimate, and the large downside surprise to May wholesale inventories moved that estimate much lower. Inventory accumulation was running light in Q1, and we had expected a significant contribution to Q2 growth from a rebuilding of stockpiles.
In the event, it now looks like inventories will be neutral for Q2 growth. Less stockbuilding in Q2 should imply a greater need to increase production in Q3, and our upward revision to current quarter growth is entirely due to a revised estimate of the inventory contribution; our estimate for Q3 domestic final sales is unrevised at 2.3%. This revision mostly reflects a temporal reallocation of growth, though on net our 2013 Q4/Q4 forecast has been nudged lower from 2.1% to 1.9%.
Does it matter that the actual economy sucks and our only hope for a good quarter is what essentially amounts to moving inventory around on a balance sheet?
Not according to Mr. Market, who, as Dave Fry notes in his charts of the S&P and the Dow action on Friday, seems perfectly content to paint the tape higher and higher as a seeminly endless supply of suckers are drawn in to buy at these nose-bleed levels.
15,500 on the Dow was the May spike high. It was tested 3 times over a 5 day period before we tumbled back to 14,700 – only a 5% correction and, if we do it again and hold 14,700 – there will be nothing bearish about that correction.
1,680 was tested just once on the S&P, before falling back to 1,570 (6.5%) but we've blown through Nasdaq 3,525 and are sitting exactly at 3,600 – so the Nasdaq is telling the other indexes to "come on in, the water's fine."…
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