Oh, man, the GDP number tomorrow is huge. HUGE! McTeer told us that number is going to come in low, and I really don't think the market has fully discounted that. The estimates I see are still calling for 3-3.5 percent GDP growth. What if it comes in at 2 or less? I don't think SUNW, ORCL, CSCO, or EMC have priced in anything near that much of a slowdown. They could crap out bigtime. On the other hand, the market being the eternal optimist, it may see low growth as an opportunity for the Fed to start its next cycle of interest-rate reductions.
But don't count on the Fed to come to the rescue here. All I hear from them is that they're still ready to raise rates if cost-induced inflation (energy, labor costs) creeps into the economy. We all can imagine what will happen then: economic death! The Fed will freeze investment in the technologies that promote productivity, and then we'll be in a situation where we have tempered (or negative) growth, rising inflation, high interest rates (expanding spreads), and slowing productivity.
It'll be very interesting to see what the market does with that number tomorrow! |
