In a busy week for economic reports, the standout was that the US economy contracted in the first quarter by a 2.9% annualized rate, the most since the depths of the last recession. According to Bloomberg, it marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. The revision reflected slowdowns in consumer and health care spending. Many economists are saying the drop was not reflective of the broader fundamentals, blaming much of the decline on weather. Maybe, but consumers don't appear to be buying it. Real consumer spending was down 0.2% in April and 0.1% in May, and the weather was good. Durable goods (designed to last long periods) orders were much weaker than expected for May as they fell 1.0% in May after rising 0.8% in April. Transportation was the largest contributor to the decline falling 3.0% after a 1.7% rise in April.

The stock market has been on a tear this week, making new highs while defying negative trending economic news and continued impasse in Washington on vital fiscal policies. The S&P 500 rose 0.4% yesterday to close at a record 1,593.37. It reversed this morning on news that retail sales for March came in well below expectations and that the weakness was broad based.

During the next two weeks, as the second quarter comes to a close, we will hear from those corporations who wish to better prepare their shareholders for the actual results they expect to report later in July and August.  The ‘pre-announcement’ season is typically used by corporations to soften the blow of bad earnings news.  Pre-announcements can be vague and, therefore, cause a less a dramatic impact on the stock than the reporting of actual results might.  At this point the companies themselves don’t know their final results, so they must be somewhat vague.