US first-quarter economic growth slowed to 1.3%, according to this morning\u2019s first revision of Gross Domestic Product (GDP), down from the 1.6% previously reported and fourth quarter 2023\u2019s pace of 3.4%. The adjustment primarily reflects lighter goods consumption and a wider trade deficit. Meanwhile, corporate profits, released in the same report, declined 0.6% on a quarter-over-quarter (q\/q), annualized basis, the first drop in 12 months. The revised report also recorded headline and core personal consumption expenditures price indices rising at quarterly, annualized rates of 3.0% and 3.1%. Both were revised downward 10 basis points (bps).<\/p>\n\n\n\n The labor market was little changed during the previous two weeks from a layoff perspective, with unemployment claims remaining well-anchored. Initial unemployment claims came in at 219,000 for the week ended May 25, near the median estimate of 218,000 and the prior period\u2019s 216,000. Continuing claims arrived at 1.791 million for the week ended May 18, also close to projections of 1.8 million and the previous interval\u2019s 1.787 million. Four-week moving averages did rise slightly for both indicators, from 220,000 and 1.781 million to 222,500 and 1.786 million.<\/p>\n\n\n\n Elevated borrowing costs and all-time high prices continue to freeze real estate activity, with April contract signings dropping sharply. Pending home sales fell 7.7% m\/m and 7.4% year over year (y\/y), according to the National Association of Realtors. Last month\u2019s data missed expectations by a wide margin, with economists expecting a m\/m decrease of just 0.6%, while March\u2019s results sported increases of 3.6% m\/m and 0.1% y\/y. The m\/m shift can be easily explained by mortgages shifting from a 6-handle to a 7 during the period. Pending home sales lead future existing home transactions, as contract signings occur before keys are exchanged.<\/p>\n\n\n\n Recent earnings reports show that technology companies are generating mixed results while consumer financial malaise is challenging retail sales and causing store operators to maintain a cautious outlook for the remainder of the year. Consider the following earnings highlights:<\/p>\n\n\n\n Risk-off sentiments are driving Wall Street today, with market players dumping stocks while scooping up gold bars and Treasurys. Most major indices are moving south with the Dow Jones Industrial, Nasdaq Composite and S&P 500 benchmarks losing 0.8%, 0.6% and 0.4%. There are some glitches occurring with the Dow and S&P indices, meanwhile, with several data reporters reflecting frozen prices (38055.11 and 5241.70) for the indices and replacing them with the corresponding ETFs, in this case tickers DJI and SPY. The small-cap Russell 2000 is up a sharp 1.1% and is the sole gainer among the top US gauges. Sectoral breadth is surprisingly positive, with the selloff concentrated in technology and communication services, which are lower by 1.7% and 0.5%. Treasurys are catching a bid, with the 2- and 10-year maturities changing hands at 4.93% and 4.55%, 5 and 7 bps lower on the session. The dollar is selling off on firmer Fed easing expectations and lighter yields, with the greenback\u2019s index down 44 bps to 104.66. The currency is down relative to all of its major counterparts, including the euro, pound sterling, franc, yen, yuan and Aussie and Canadian dollars. Risk-on commodities that depend on economic activity are getting battered while safe-haven gold is performing well. WTI crude oil and copper are down 1.2% and 2.7% while gold travels north by 0.3%. <\/p>\n\n\n\n The unexpected fall in corporate profits was this morning\u2019s most compelling development. While the figure is broad, encompassing large Fortune 500 companies as well as mom-and-pop shops, such as those in my old Queens neighborhood, it has significant implications for earnings expectations for the S&P 500, particularly at a time when we\u2019re sporting heavy profit margins while trading at 21 times forward earnings. Additionally, investors are assessing the likelihood that the Fed is unlikely to cut rates imminently. If corporations fail to meet earnings expectations going forward and growth projections are pared back following decelerating consumption and a challenging cost landscape, valuations and margins are increasingly likely to face mounting pressure. Finally, tomorrow\u2019s personal income and outlays report will provide a shorter-term look at growth, spending, income and inflation dynamics for the month of April. <\/p>\n\n\n\n![\"Corporate](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/Corporate-Profits-5-30-24.png\")
<\/figure>\n\n\n\nEmployers Continue to Hold onto Workers<\/strong><\/h2>\n\n\n\n
![\"Unemployment](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/Unemployment-Claims-5-30-24.png\")
<\/figure>\n\n\n\nPending Homes Sales Decline<\/strong><\/h2>\n\n\n\n
![\"Pending](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/Pending-Home-Sales-5-30-24.png\")
<\/figure>\n\n\n\nTech Spending Hangover and Weak Consumers Dominate Earnings Calls<\/strong><\/h2>\n\n\n\n
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Investors Rush to Safe Assets<\/strong><\/h2>\n\n\n\n
Fundamentals Become Increasingly Important<\/strong><\/h2>\n\n\n\n