Market Preview: Zillow Primed for Pricey Debut

NEW YORK (TheStreet) -- The earnings reports were good but the progress on the debt ceiling was even better.

Stocks enjoyed their best day of 2011 on Tuesday, spiking on fresh signs the Democrats and Republicans will be able to get together on what it will take to shave trillions from the deficit. Apple's(AAPL) blowout quarter after the close should provide plenty of momentum for Wednesday's session.

Throw in the prospect of more favorable debt ceiling headlines over the next few days, and bulls look primed to run a bit further.

Another positive sign for equities was the excess of investor interest in Zillow(Z), the latest new offering to see off-the-charts interest ahead of its debut. The real estate valuation Web site operator priced its initial public offering at $20 per share, well beyond the expected range of $12-$14 per share, setting the stage for what could be a volatile debut on Wednesday.

Heck, the optimism is such that some of the pessimism about second-quarter GDP that's cropped of late is dissipating. Research firm Capital Economics said Tuesday it now believes growth may have picked up to 2.3% in the second quarter from 1.9% in the first quarter. That's up from a prior expectation of 2% with the firm saying "latest monthly data have persuaded us to revise that estimate up a little."

"The Japanese earthquake caused a decline in both US vehicle production and sales, but the effect on overall GDP was partially offset by a drop in imports from Japan," the firm wrote. "In addition, the second quarter saw a rebound in military spending and a jump in home renovation after all the tornadoes in April and May."

What's more Capital Economics thinks the third quarter may show an even more dramatic acceleration, although it's not sold on the idea that the recovery could be gaining steam.

"Third-quarter GDP growth could be even stronger, as falling energy prices boost real incomes, but we still think that growth will slow again in 2012 as the fiscal consolidation really begins to bite," the firm said.

Wednesday's economic calendar is light again with another read on the housing market the most notable piece of data. Existing home sales for June are due at 10 a.m. ET with the consensus view calling for 4.93 million, and Briefing.com a bit lower at 4.9 million. Ian Shepherdson, chief U.S. economist at High Frequency Economics, expects this number to better than expected, just like Tuesday's reads on housing starts and building permits, but he feels it's too soon to get too excited.