A version of this commentary originally appeared on Real Money Pro at 8:05 a.m. ET on Tuesday, March 29. Click here to learn about this dynamic market information service for active traders.
The S&P 500 remains well above my fair-market-value estimate, even though the Atlanta Federal Reserve has slashed its estimate for U.S. real gross domestic product's first-quarter growth rate to just 0.6%.
That's down from a 1.4% forecast issued only four days earlier. Atlanta Fed economists wrote that in the wake of Monday morning's release of unimpressive February U.S. personal-income-and-outlays data, "[our] forecast for first-quarter real consumer-spending growth fell from 2.5% to 1.8%.
"The forecast for the contribution of net exports to first-quarter real GDP growth [also] declined from -0.26 percentage points to -0.52 percentage points following yesterday morning's advance report on international trade in goods from the U.S. Census Bureau," the economists added.
It's important to note how quickly the Atlanta Fed cuts its GDP forecast. Just a month ago, the bank was estimating first-quarter real GDP growth at 2.5%, in part because personal spending was expected to grow 3.3% during the period.
But I believe that even the group's reduced GDP forecast might still be too high. After all, it assumes a still-generous 1.8% consumption-growth rate for the first quarter even though January/February consumption came in at just 1.3%.
Meanwhile, a thoughtful Bloomberg Intelligence study yesterday outlined a disappointing U.S. corporate-profit and capital-spending picture. Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Richard Yamarone noted that U.S. corporate profits fell 7.8% in the fourth quarter -- the biggest decline since a 9.2% pullback in 2011's first period. They added: