The broad indices finished mixed, after the Bureau of Economic Analysis (BEA) said that U.S. real gross domestic product grew at an annual rate of 2.5% in the first quarter from the fourth quarter.
The GDP growth rate improved from 0.4% in the fourth quarter, when spending was curtailed by Superstorm Sandy. Economists polled by Thomson Reuters had estimated the first-quarter GDP growth rate would come in at 3%.
This was the BEA's first GDP estimate, "based on source data that are incomplete or subject to further revisions by the source agency." The BEA will release its second GDP growth estimate for the first quarter on May 30.UBS economist Maury Harris said that the disappointing GDP figure was "all public sector" and that "private GDP was at a 3.3% annual rate."
Federal spending was expected to decline, with required budget cuts and employee furloughs, following the sequestration that began in March. The BEA said that "the increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, residential investment, and nonresidential fixed investment." This implied that there was little effect on consumer spending from the end of the 2% reduction in Social Security taxes in January. On a more positive note, the final estimate on the University of Michigan Consumer Sentiment Index was also released this morning, coming in at 76.4 in April vs. the initial estimate of 72.3. Economists were expecting a reading of 73.2 for April. The KBW Bank Index (I:BKX) was down slightly to close at 56.58, with all but six of the 24 index components showing declines for the session.
Wells FargoShares of Wells Fargo have returned 11% year to date, following a 27% return during 2012. The shares trade for 1.3 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.7 times the consensus 2014 earnings estimate of $3.90 a share. The consensus 2013 EPS estimate is $3.70.
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