Shownotes Transcript
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis.
Good afternoon, today is Wednesday, April 30th, and I'm your host, Kim Kahn. Our top stories so far. The U.S. economy shifted into reverse in the first three months of the year as preparations for tariffs weighed on GDP figures. It was the first GDP contraction in nearly three years. The initial estimate of Q1 GDP showed the economy contracted at an annual pace of negative 0.3%, compared with 2.4% growth in Q4 and weaker than the 0.2% rise expected.
The drop in real GDP in Q1 reflected an increase in imports, which was telegraphed in yesterday's March trade figures, which saw the U.S. trade deficit balloon. On the other side were increases in investment, consumer spending, and exports. Economist Ernie Tedeschi says this report is almost exactly what an otherwise healthy economy looks like anticipating, but not yet directly hurt by, tariffs. Consumer durable spending collapses.
Services are fine for the moment. Businesses get as many imports as they can and stock up their inventories. Odds of a U.S. recession on polymarkets surged above 70%, the highest they've been since just after Liberation Day, and up from around 20% at the start of March.
but real final sales to private domestic purchasers, which is sometimes known as core GDP, and the sum of consumer spending and gross private fixed investment, increased at a 3% rate. That's a touch higher than in Q4. Robin Brooks of the Brookings Institute says, We're living through a huge natural experiment. This is tariff front-running as firms stockpile. Also on the bright side, the Fed's favorite inflation gauge cooled more than expected in March. The March core PCE price index was flat,
versus consensus of a 0.1% and a 0.5% rise in February that was revised higher. On a year-on-year basis, the measure, which excludes food and energy prices, increased 2.6% that's in line with consensus and down from 3% prior. The annual rate is the lowest it's been now since March 2021. Pantheon macroeconomist Samuel Toom says, "The core PCE deflator remains blighted by residual seasonality, with
with increases in January and February far above the underlying trend. We doubt, therefore, that the pickup in 3-month-on-3-month annualized growth in the core PCE deflator to 3.5% in Q1 from 2.6% in Q4 will worry the FOMC much. But neither underlying growth strength nor dovish inflation figures impress stock traders. Futures tumbled after the GDP print,
And the major averages are significantly lower, albeit off their lows, with the NASDAQ down about 2% and the S&P 500 down less than 1.5%.
The bond market is holding up better. The 10-year Treasury yield is above 4.15%. Among active stocks, Taco Bell was the star for Yum! Brands, which reported a slight miss in Q1 revenue. Same-store sales growth was positive for Taco Bell, up 9%, and KFC, up 2%, but fell for Pizza Hut, down 2%. The Habit Burger grill division was flat for the quarter. Overall, comps rose 3% to edge above the consensus of up 2.9%.
Supermicrocomputer is plunging after the AI server maker reported preliminary third quarter sales that were hampered by delays. During Q3, some delayed customer platform decisions moved sales into Q4, the company said in a statement. As such, Supermicro's gap and adjusted gross margins were 220 basis points lower than in the second quarter, largely due to higher inventory reserves resulting from older generation products and expedite costs to enable time to market for new products.
and Western Digital is among the best S&P gainers after its outlook beat estimates. The company expects fiscal fourth quarter revenue to be in the range of $2.45 billion plus or minus $150 million. Consensus is for $2.35 billion. Non-GAAP EPS is seen in the range of $1.45 plus or minus $0.20 with a consensus at $1.14. In other news of note, House Republicans have proposed new fees on electric vehicles as
as a mechanism to collect revenue to repair federal roads and bridges. Owners of gas and diesel cars already pay a similar fee of 18.3 cents per gallon when they purchase fuel. The House Transportation and Infrastructure Committee's reconciliation bill draft outlines new annual registration fees for three types of vehicles starting in the next decade.
Electric vehicles would see a $200 fee, hybrid vehicles would have a $100 fee, and other cars would have a $20 fee. Those fees would go up on an annual basis to account for inflation. The new fees are estimated to raise at least $50 billion over the next decade, according to estimates. 39 states in the U.S. already charge a fee on electric vehicles for road repairs. And in the Wall Street Research Corner, Wells Fargo strategist Chris Harvey says markets may have reached a long-term bottom earlier this month. He'd
He pointed to reduced investor panic and improving sentiment around tariff negotiations. The recent risk aversion performance signaled a short-term bounce, and Harvey now views the market as operating within a wide $5,000 to $5,600 range, a zone they're calling the Trump collar, pending further clarity on trade policy. He is also upgrading the utilities sector to overweight from neutral, while downgrading consumer staples to neutral from overweight.
The shift favors continued low volatility exposure, but tilts towards utilities based on improved relative valuations, sensitivity to tariff developments, and emerging connections to AI infrastructure. Duke Energy, Atmos Energy, CMS Energy, and Evergy all get overweight ratings from Wells Fargo analysts.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And make sure you're getting the most out of your portfolio with quant, news, and analysis by heading to SeekingAlpha.com slash subscriptions.