More than half of the corporate earnings releases out so far have been market consensus. Google and Amazon beat that consensus on Thursday. Yet, first quarter GDP grew a meager 0.7%. The fact that the market didn’t react negatively to that unexpectedly low number suggests investors are looking at the other hard data still coming in — earnings — and are hearing good news on conference calls.
Household consumption slowed, but consumer sentiment remains high. That’s a mixed signal, but surely better than consumers tightening the purse strings and saying they are less enthused about their spending powers.
The numbers out Friday also showed strong gains in fixed investment. And exports improved over the fourth quarter. Stripping out the inventory component shows that final sales rose 1.6% on a quarterly basis, up from 1.1% growth in the fourth quarter.
Investors have been waiting for the hard data to come in line with the bullish soft data. GDP numbers were weak, and didn’t make the case that the sentiment surveys have this market right. Bears will see this as a sign the market is losing momentum. Short interest rose 3.2% on the SPDR S&P 500 (SPY 515,71 +2,85 +0,56%) on Tuesday.
The top five companies that have the largest percentage of shares short include energy player RPC Inc. (RES 7,97 +0,13 +1,66%) with 58.2% of its shares short as of Tuesday, generic drug maker Lannett (LCI 1,78 -0,08 -4,30%) at 51.7%, home goods company RH (RH 298,36 -12,22 -3,93%) at 49.3%, Shake Shack (SHAK 104,28 +1,90 +1,86%) with 45.2% short adn Valvoline (VVV 43,38 -0,15 -0,34%) at 45% short.
Worth noting: official numbers tend to understate growth in the first quarter. Seasonally adjusted growth is seen over 2%. Year-over-year GDP figures showed 1.9% growth, in line with the 2% annualized GDP growth in the fourth.