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Markets close higher, slew of data leads economists to slash GDP forecasts

U.S. stocks closed higher on Thursday despite the release of multiple economic reports earlier in the day, some of which fell short of expectations. The results led multiple Wall Street economists to cut their forecasts for third-quarter gross domestic product growth.

The S&P 500 (^GSPC) was up 0.28%, or 8.04 points, while the Dow (^DJI) was up 0.21%, or 54.65 points, at market close Thursday. The Nasdaq (^IXIC) was up 0.65%, or 51.6 points, lifted by gains from FAANG members Apple and Amazon.

Across the country, viewers including traders turned their attention to the Senate Judiciary Committee hearing on Brett Kavanaugh, which began at 10 a.m. eastern time. The Supreme Court nominee and Christine Blasey Ford were scheduled to testify on Capitol Hill after Ford went public two weeks ago with sexual assault allegations against Kavanaugh, which he has since denied.

President Donald Trump pushed back a meeting with Deputy Attorney General Rod Rosenstein to next week so as not to distract from the congressional hearing, White House Press Secretary Sarah Sanders told reporters Thursday. The meeting was originally scheduled for Trump and Rosenstein to discuss a New York Times report from last week that Rosenstein had suggested secretly taping the president to invoke the 25th Amendment and remove him from office.

ECONOMY: Some economists cut third-quarter GDP forecasts after the release of new data

Initial claims for state unemployment benefits rose by 12,000 to a seasonally adjusted level of 214,000 for the week ended Sept. 22, the Labor Department said in a release on Thursday. This exceeded average estimates of 210,000, according to data compiled by Bloomberg. Data for the prior week’s claims was upwardly revised to 202,000.

Manufactured durable goods orders for August rose 4.5% to $259.6 billion, according to a release from the Census Bureau. The pace of growth was much stronger than the 2% projected by average analysts estimates, according to data from Bloomberg. New orders increased 0.1 percent excluding transportation. However, non-defense capital goods orders excluding aircraft, which is considered a proxy for business investment, actually fell 0.5%. Economists had forecast a 0.4% gain.

The advanced goods trade deficit for August fell to a seasonally adjusted rate of $75.8 billion, the Census Bureau said in a statement. This represented an about $5 billion greater deficit than the average analyst expectations of $70.6 billion, according to data compiled by Bloomberg. The prior-month data was revised to a deficit of $72 billion.

“The administration’s narrative, that the Q2 drop in the deficit was a result of their trade policies, has now fallen apart, as it was always likely to do,” Ian Shepherdson of Pantheon Macroeconomics wrote in a note. He added that the deficit fell during the second quarter as a “correction from the surge” of the quarter prior, when imports soared after damage from Hurricane Harvey trigged demand for destroyed items.

“Now, the data capture the simple point that the U.S. economy’s supply-side does not have the slack needed to meet domestic demand pumped up by the tax cuts and government spending increases,” Shepherdson said. “The deficit has further to rise.”

Gross domestic product grew in the second quarter at an annualized rate of 4.2%, unrevised from the previous quarter and matching average analyst estimates. The results indicate the fastest pace of growth since late 2014. Real gross domestic product increased 2.2% in the first quarter.

Following the release of these reports, several Wall Street economists slashed their forecasts for future GDP growth.

“The durable goods and trade reports brought down our 3Q GDP tracking significantly, while the positive inventories data provided just a small offset,” Morgan Stanley economists wrote in a note. “Accounting for this morning’s data, we lower our 3Q GDP tracking to 2.7% from 3.4% previously.”

Economists at Barclays also cut their GDP tracking estimates to 2.8%, from a previous 3.2% quarter-on-quarter seasonally adjusted annualized rate. They cited “weaker-than-expected trade data” pointing to a “larger drag from net exports” in the third quarter. J.P. Morgan economists likewise slashed their estimates for third-quarter GDP growth to 3% from 3.5%, and Goldman Sachs lowered estimates by two-tenths to 3.1%.

Traders watch the price of X Financial, a Chinese technology personal finance company, following the company’s IPO on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 19, 2018. REUTERS/Brendan McDermid
Traders watch the price of X Financial, a Chinese technology personal finance company, following the company’s IPO on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 19, 2018. REUTERS/Brendan McDermid

STOCKS: Apple gains after J.P. Morgan initiates bullish rating, weed stocks climb on new DEA announcement

Shares of Apple (AAPL) climbed Thursday after J.P. Morgan Securities initiated coverage of the company with an overweight rating and price target of $272 – a 23% upside from share prices at market close Wednesday. Apple is said to be growing its services business at a faster-than-anticipated pace, and is benefitting from increases in average iPhone prices. The stock was up 2% to $224.95 per share at market close Thursday.

Shares of Bed Bath & Beyond (BBBY) continued to fall after the home goods store reported a decline in same-store sales in its latest quarterly earnings release Wednesday. Same-store sales fell 0.6%, the company reported, while average analyst estimates had predicted an increase of 0.3%. The stock sank 21% to $14.86 per share at market close Thursday.

Shareholders of Canopy Growth Corporation (CGC/WEED.TO) , a Canadian cannabis producer,
approved a $4 billion investment from a subsidiary of the alcohol giant Constellation Brands. The transaction is anticipated to be completed by Oct. 31 after receiving regulatory approval.

Pot stocks are on the upswing again after the U.S. Drug Enforcement Administration classified a cannabidiol-based drug Epidiolex in its least restrictive category, bringing the anti-seizure drug closer to a commercial roll-out. Shares of GW Pharmaceuticals (GWPH), which manufacturers Epidiolex, rose 7% to $174.50 per share at the close. Other cannabis companies also gained on the news: Shares of Tilray (TLRY), a Canadian cannabis company, rose 14.67% to $131.30 per share.

Share prices of cannabis-related stocks have been wildly volatile as of late, with some spiking to rapid highs calling to mind last year’s cryptocurrencies craze.

NEWS: U.S.-Mexico trade text expected for release Friday

The U.S. is expected to release a new trade deal with Mexico as soon as Friday, according to reports from Bloomberg. Though the latest text is said to likely exclude Canada, it may leave room for it to join later. Canada and the U.S. have missed several previous deadlines to negotiate a deal to include Canada in a revised Nafta, with the latest deadline approaching at the end of the month.

E-commerce giant Amazon (AMZN) opened its new physical store, Amazon 4-star, in New York City’s SoHo Thursday. The store only offers products customers have rated 4 stars or above, including certain devices, consumer electronics, kitchen, homewares, toys, books, and games.

Jeff Bezos’s other venture, space transportation company Blue Origin, reportedly won a contract to provide its BE-4 engines for the United Launch Alliance’s Vulcan rocket, the Wall Street Journal first reported Thursday, citing unnamed sources. United Launch Alliance is a join venture between Boeing Co. and Lockheed Martin Corp. that helps launch spacecrafts for the U.S. government.

Stripe, raised $245 million in funding Wednesday, bringing the fintech startup’s total valuation to $20 billion. The payment software company was valued at just $9.2 billion in 2016. The company plans to use the new funds to generate overseas growth in regions including Southeast Asia and India, and will open a new engineering hub in Singapore.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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