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Cash-Rich Consumers Fuel U.S. GDP Growth To 6.4% In Q1

Cash-Rich Consumers Fuel U.S. GDP Growth To 6.4% In Q1

Plus, Apple delivered a massive earnings beat, Altria shares are down on mixed earnings results and Biden administration plans to ban menthol cigarettes, and Ethereum rose to a new all-time high.

Stocks were higher at the open on Thursday with the Dow adding 35 points, or 0.1%. The S&P 500 rose 0.5%, while the Nasdaq jumped 1.1%.

Cash-rich consumers fueled U.S. GDP to a 6.4% annualized rate in the first quarter, the Commerce Department said this morning. Personal consumption, he biggest part of he economy, surged an annualized 10.7%, the second-fastest rate since the 1960s. Household and business spending left inventories lean, spurring import demand and weighing on first quarter growth. “When you get a GDP report that features accelerating consumption and declining inventories, it can be considered even stronger than the headline number might suggest,” said Kevin Cummins, chief U.S. economist at NatWest Markets. “I’m really optimistic about the growth path we’re going to have over the next three or four quarters.” In other positive economic results, jobless claims fell to a fresh pandemic low. The Labor Department reported that initial claims fell to 553,000 for the week ended April 24. Continuing claims rose for the first time this year to 3.66 million for the week ended April 17.

Apple delivered a blowout earnings report after the bell yesterday, with double-digit growth in every single one of its product categories. The iPhone maker reported earnings per share of $1.40 on revenue of $89.58 billion, up nearly 54% year-over-year. iPhone revenue rose 65.5% year-over-year, Mac revenue rose 70%, iPad revenue jumped 78.9%, and services revenue rose 26.7%. “This quarter reflects both the enduring ways our products have helped our users meet this moment in their own lives, as well as the optimism consumers seem to feel about better days ahead for all of us,” said Apple CEO Tim Cook. Blockbuster quarter aside, the global chip shortage is finally catching up with the company. Cook and Chief Financial Officer Luca Maestri warned on a call with analysts that supply constraints are crimping sales of iPads and Macs, with Maestri noting that the shortage will knock $3 billion to $4 billion off revenue during the company’s fiscal third quarter.

In other earnings news, Facebook shares are up more than 6% this morning after the social media giant reported a 48% jump in first quarter revenue on higher ad prices. Facebook reported earnings per share of $3.30 on revenue of $26.17 billion, compared to analysts’ estimates for earnings of $2.37 per share on revenue of $23.67 billion. McDonald’s also delivered an earnings beat, posting earnings per share of $1.92 on revenue of $5.12 billion, versus estimates for earnings of $1.81 per share on revenue of $5.03 billion. Chicken-focused menu items, including Spicy Chicken McNuggets and the Crispy Chicken Sandwich, helped fuel sales in the quarter. And Comcast delivered a beat as well, with earnings of $0.76 per share on revenue of $27.21 billion, while analysts expected a reading of earnings per share of $0.58 on revenue of $26.7 billion. Comcast’s Peacock streaming service reached 42 million sign-ups in the first quarter, up from 33 million in the prior quarter. “We are very encouraged with Peacock so far,” the company said on the earnings call, adding that it has doubled its projections for the service.

Altria shares are down nearly 2% this morning after the Marlboro parent delivered mixed first-quarter earnings and on confirmation that the government plans to ban menthol cigarettes. The company said it earned $1.42 billion, or $0.77 per share, down from earnings of $0.83 per share in the same quarter last year. The results came just hours after the Biden administration announced that it will propose a ban on menthol-flavored cigarettes, which would be a huge blow for future cigarette sales. “With these actions, the FDA will help significantly reduce youth initiation, increase the chances of smoking cessation among current smokers, and address health disparities experienced by communities of color, low-income populations, and LGBTQ+ individuals, all of whom are far more likely to use these tobacco products,” Acting FDA Commissioner Janet Woodcock said in a press release. 

And Ethereum, the world’s second-largest cryptocurrency, surged to a new all-time high of $2,800 this morning, stealing the limelight from Bitcoin. The move higher comes after the European Investment Bank announced that it had issued its first ever digital bond on the Ethereum blockchain. “In the case of Ether versus Bitcoin, there is evidence of more resilient liquidity, less reliance on derivatives markets to transfer and warehouse risk, and more durable underlying demand base – for now at least,” JPMorgan analysts led by Joshua Younger said in a note, adding that there are “bullish tailwinds” for Ethereum while Bitcoin remains well below a mid-April peak.

Stocks We’re Watching

Essa Pharma (NASDAQ: EPIX): Essa Pharma announced yesterday that it has entered into a clinical trial collaboration and supply agreement with Bayer to evaluate Essa’s lead product candidate, EPI-7386, with Bayer’s androgen receptor inhibitor, darolutamide, in patients with metastatic castration-resistant prostate cancer. “We are delighted to collaborate with Bayer to explore the potential clinical role of EPI-7386 in combination with Bayer’s darolutamide in patients with metastatic castration-resistant prostate cancer, who have progressed on androgen deprivation therapy,” Dr. David R. Parkinson, Essa Pharma CEO, said in a press release. “Combining our two therapies will simultaneously target both ends of the androgen receptor, and potentially allow for a more potent approach to suppressing androgen activity. We look forward to investigating the combination of these therapies and their potential role together in the treatment of prostate cancer.”

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