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Data and Earnings Deluge

Before we attempt to get our arms around another deluge of earnings reports ahead of the final opening bell of this trading week, we get a first look at Q3 GDP: 3.0%, up from the consensus estimate of 2.7%, and a second consecutive 3-handle following Q2’s final read of 3.1%. This marks the first time since 2014 the U.S. economy had GDP numbers at or above 3% since 2014.

Particularly noteworthy about this number is that we did see some negative impact on GDP in the quarter from Hurricanes Harvey, Irma and Maria — most notably in consumer spending, which had ratcheted down from 3.3% the previous quarter to 2.4% this time around. That Q3 GDP could take a 90-basis-point hit and still reach 3% illustrates economic strength beyond the power of the consumer.

Inventories were up 0.7%, but this is normal coming as it does ahead of holiday season. Perhaps surprisingly, the federal government spent more in Q3. And maybe most importantly, as Zacks Chief Strategist John Blank pointed out last week, no major economies in the world are currently experiencing a recession. Growth is now global and synchronized; it is a very rare occurrence to see no geopolitical headwinds from the Americas to Europe to Asia-Pacific.

Q3 Earnings Roll On

Aside from big blowout beats after yesterday’s close from Amazon AMZN, Alphabet GOOGL and Microsoft MSFT — which by themselves have already added an additional $80 billion to the market — we see more earnings tonnage, generally from oil & gas and pharma/bio sectors:

ExxonMobil XOM shares are up modestly in today’s pre-market following Q3 results that surpassed estimates on both top and bottom lines. Earnings of 93 cents per share topped the Zacks consensus by 4 cents, whereas revenues really outperformed expectations: $66.17 billion far exceeded the $63.51 billion we had been looking for. This marks the fourth beat out of the past five quarters for the largest oil & gas “supermajor,” and in an energy sector that has struggled in 2017, XOM looks to be improving.

Chevron CVX also beat estimates for both earnings and sales this morning, with $1.03 per share surpassing the 98-cent consensus on revenues of $36.21 billion, ahead of the $34.06 expected. Outgoing CEO John Watson, who will retire early next year, cited continued improvement in both earnings and cash flow for the supermajor.

Refining company Phillips 66 PSX posted a mixed Q3 during today’s pre-market, with earnings of $1.66 per share beating the consensus estimate by 4 cents, though $26.2 billion in revenues fell short of our estimated $29.9 billion. The company’s Refining business more than tripled in the quarter, offset by underperformance quarter over quarter from Midstream, Chemicals and Marketing.

Pharmaceuticals major Merck & Co. MRK posted $1.11 per share, ahead of the $1.03 Zacks consensus estimate. However, quarterly sales of $10.33 billion was short of the $10.50 billion we had been expecting. That said, Merck upped its fiscal year earnings guidance from $3.76-3.88 per share last time around to $3.91-3.97 this morning. Following an initial bump up of 1% in the pre-market, shares are now trading down more than 2.5% ahead of the bell.

Also, biopharma firm AbbVie ABBV, which had branched off from Abbott Labs in 2013, beat earnings estimates by 2 cents to $1.41 per share, whereas revenues of $7 billion came in basically in-line with estimates. Lymphoma treatment Imbruvica rose 37.3% year over year, and rheumatoid arthritis drug Humira improved 14.8% from the year-ago quarter.

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