Will Q1 GDP end up negative?

May 5, 2015 09:32 AM

U.S. stocks were poised to open lower on Tuesday, after two sessions of gains, as a surge in trade deficit in March suggested that economic growth contracted in the first quarter.

The U.S. trade deficit surged to its highest level in nearly 6-1/2 years in March and the $51.4 billion trade gap was far larger than the $45.2 billion deficit the government assumed in its snapshot of first-quarter gross domestic product last week.

A now-settled labor dispute at West Coast ports had significantly slowed trade at the start of the year. The dollar's surge has also weighed on trade and on corporate earnings reports.

About 68% of the S&P companies that have reported results so far, have reported earnings above analysts' estimates, above the 63% that typically beat in a quarter. However, only 44.4% have beaten on revenue, below the typical 61%.

"The dollar is clearly one factor in the lower revenue number," said Tom Donino, co-head of trading at First New York Securities in New York.

"The dollar has probably peaked in the short term and I think its going to be range bound through the summer."

S&P 500 e-mini futures were down 7.25 points and their fair value – a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract – indicated a lower open.

Dow Jones industrial average e-mini futures fell 61 points and Nasdaq 100 e-mini futures lost 23.25 points.

Dow component Disney rose 2.2% to $113.50 in premarket trading after it's quarterly revenue beat analysts' expectations.

Tesla gained 3.3% to $238.20 after Jefferies started coverage with a "buy" rating, saying investors worries about China sales are overblown.

Discovery Communications rose 5.2% to $32.50, while cosmetics maker Estee Lauder rose 5.1% to $87.80 after both companies reported better-than-expected profits.

Netflix was up 2.6% at $569.50 after BofA Merrill Lynch upgraded the stock to "buy", according to Theflyonthewall.com.

AcelRx Pharmaceuticals slumped 27.6% to $3.04 after the FDA rejected a meeting request to discuss the need for additional trial of its pain drug device.

U.S. service sector activity is expected to have grown at a steady clip in April. The data is expected at 10 a.m. EDT (1400 GMT).

News Corp and Groupon are scheduled to report after the close.

About the Author

Tanya Agrawal, Reuters