Economic Growth Smaller Than Expected

Alix Steel analyzes the morning business headlines.
9:57 | 01/27/12

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Transcript for Economic Growth Smaller Than Expected
You're watching live coverage of the opening bell on ABC news now this morning and -- being round that remotely from Davos Switzerland site of the world economic form. And there is the -- for this Friday January 27 hello everyone I'm Stephanie -- in New York Dow futures went south this morning when the Commerce Department released disappointing numbers on GDP. Joining me now to discuss that all the business headlines as we head into the weekend is -- steal from the street -- great to see you as always as you so let's start with that news on GDP just numbers out just in the last hour show growth for the fourth quarter of 2011 was two point eight. Percent that's a bit lower than expected right. Again yes mr. ranging anywhere from 3% to three and a half percent so this doesn't disappoint me here was pretty -- I talked to a portfolio manager who said mild disappointments a -- to see how the market digests that again this the first reading we have a couple revisionist. -- the real issue here was lower defense spending. And lower spending on services. Those were the bad signs that -- -- -- -- manufacturing spending was actually up and that's -- job growth actually comes from so that's the good part. Inventories aware of ways and -- weren't rose about 56 billion dollars in annualized rate that was great it was much better than the 45 billion that we were expecting the real bummer though I can sit -- his final sales that's wrote -- -- inventories. Was only eight tenths of -- percent we're expecting two and a half percent and that's because we imported more goods rather than buying domestically. And that actually is going -- really big problem that was a big debt. And what if anything did he is never say about current GDP here in the first quarter of 2012. It's -- -- using its very noisy on the one hand you have a lot of analysts expecting. -- and it that all the inventory demand to be brought forward to take advantage just in tax credit so at the question is how strong -- inventory restocking remain doesn't have to be 56 billion -- -- really needs to stay above forty billion. That's the wild card the next -- -- defense spending rarely do we get two quarters in a row. Where defense spending is down how ever we heard yesterday that the secretary of defense saying -- -- defense spending is going to be cut. Right -- 2013. Fiscal budget they do in October to September fiscal budget it down 5% from 2012. So that's going to be a very big loud crack also exports we still have a strong dollar that hurts our export market -- if the -- it is sixty steadily devaluing the dollar somewhat which it looks like it's trying to do. Will that help our export market. So it's -- -- be murky it's going to be a little bit noisy. Yet like you said the market sort of trying to absorb all this information right now -- trading down just in the first few minutes. Down about fifty points OK let's talk about earnings because Ford is out this morning with its earnings and 201111. Was deemed best here to -- companies as the 1990s. -- you say we need to go beyond the headline there. Yet again really know breezy cigarette so the first -- you know 2011 best year for the company -- 1998 that's great. They did miss they -- and about twenty cents a share we are expecting a 26 cents a share revenue was indeed it was just over 32 billion dollars. Basically we saw -- operating profits -- get a higher commodity costs and weakness in Asia and here -- So how's that -- plant is here is -- it continues to try and recover. We -- -- which is what they spend to grow rising to about five and a half billion dollars that's a positive sign. Because it means that they might see grow -- we just had a cycle -- fresh mind me my guys is when these sales count for cars and trucks. And a lot of trucks out there are really old. And so eventually you half -- replaced background might not have to replace a car. But you -- plays a truck we saw that get -- stopped when the recession hit the US. We're entering the point where we do have to have a quote -- fresh cycle so that might help stabilize. And an end and help the pent up demand so again it's a little bit noisy the stock is down though because it had big run into -- earnings you can't just take that -- face value. OK we've got earnings from roughly a dozen other companies today in the S&P 500 among them Chevron Honeywell. And Procter & Gamble any headlines there. It should want to point out Chevron was really -- They already lowered guidance saying that it's gonna be -- -- quarter. Our refining revenues gonna be really bad and you know what -- even may remember it they came a lot less than they had -- anticipated it's never a good sign. And you look at Procter & Gamble they beat on their earnings an eight dollar and ten cents a share revenue was just over 22 billion does a little -- The real headline here it cut its 2012. Fiscal forecast they're now expecting revenue growth to -- -- -- three to 4%. That's verses about 5%. And that's a big hit and it's also due to a stronger dollar is the foreign exchange issue that we keep hearing -- -- about. Gross margins also -- that to be an inflationary factor issue and again. Stop was also treating her down earlier on -- You know but overall stocks have really been on fire since the start of the year really Alex are -- seeing with all this news you've just been -- -- Possibly this rally run out of some steam. We see how it digests all these and all -- bad news today mean you me you mention the Dow is only off fifty points that's not totally terrible. So they can digest negative news that's a good sign and might fuel traders to jump back in and really push it higher that said we're very much an overbought territory the markets looking a little tired. We just totally understandable. I -- to point out that that this is the eighth best starts. Of -- a year for the S&P since 1945. -- January. Has a good it was over 1% for January guessing he's over 1% it we have double digit returns on average for they -- the years -- to wonder. He had traders really wanting to bid up the market as we head into the end of January and like I said you know the Fed. Really seems committed to a weak dollar policy by keeping interest rates low. Throughout and until the end of 2014. And that's always a good sign for stocks like I mentioned it helps fuel exports -- a bullish us sign underneath the market and we'll have to see where buyers slowly stepping in hear and read a quote unquote by that -- OK let's talk about your specialty goals are expecting another rally there any times and yet we had huge rally at -- three point 7% in two days that is huge. Taken a little bit of breather today again this is moving on the Fed's announcement -- -- Wants to spur inflation it would rather. -- and avoid its price stability mandated bogeys on strengthening growth focus on strengthening the employment situation in dealing with and police and still wants to pump more money into the system essence trying to do by lowering rates until 2014 that it's a positive sign for gold. Because literally -- dollar in the bank is worth less than if you -- an ounce of gold and that's why you saw that really big rally. The worry is of course that the US economy actually -- this -- -- hold itself to that 2000 and -- -- interest rate hike and if it doesn't hikes earlier that's -- back for golf. In -- -- current short term here this sort of -- after glow that comes the wesun that's probably -- the market right now you probably missed the chance to write that big rally. So if we can kinda slow around here Brian a little bit higher when I'm hearing as we could be looking at new highs -- much sooner than expected. If we see a lot of volatility if the -- at seeing continued 4050 dollars bikes we could see some margin high requirements from the CME and that always puts it to -- on any kind of rally they a look at at a precious metals. And last not least -- -- point your attention in terms of -- to India. Because high prices and volatility is very difficult for Indian demand to absorb that -- -- -- the market and you really need Indians in the market here by gold tipped to support higher praises. On the flip side. If they're now expecting 2000 dollar gold in three years six months they're gonna get in -- -- and -- because it's cheaper so that's one -- credit for interested in gold that you really need to keep your. -- I'm okay as we earlier saw the bell rang out and stop us -- as wonder if there's anything other than skiing and candies to these meetings outlets on the in your debt crisis are they addressing that today we learned today that Spain's unemployment rate is -- 22%. That you say Greece and Portugal. Are still in worse shape -- all this. -- have your kids didn't get it and -- -- Leader what you heard from data as they veterans say it's always about the European -- debt crisis now. Some people think it's really worse and -- some CEOs appointees and strength to your guess -- is -- good as mine at that point but in terms of what's bad. Portugal is actually on my radar to date the yield on the ten year bonds are not 16%. And now the chatter is -- is Portugal -- is second bailout. This comes of course as breezes trying to secure its second out of 130 billion euros to do that though it has to make -- -- private bondholders now. Private bondholders are gonna trading current bonds get longer dated bonds that are switching out the really issue though is -- interest payments they want 4% Greece wants three and a half percent we might see an agreement about three. And three quarters of a percent we might hearing deal though -- Monday it would just went another EU summit kicks up it seems like they're always having -- now. End -- how to -- and talk about their fiscal union 26 countries in December agreed to a tighter fiscal union except for the UK. And -- -- -- trying to hammer out the deet tails also they're dealing with a permanent bailout converse the temporary bailout fund can operate together. Which increased firepower about 700 billion euros that would be very positive step but Jeremy is resistant to -- We also -- countries want to commit. About 200 billion euros to the -- hadn't -- -- that -- to their public and discuss that as well so it's not a do or die situation if she's. They need to keep plugging along and showing that they're taking steps and that's and we need to be looking for and maybe more solutions -- -- let's take a look at the Dow right now in the first ten minutes of trading the Dow trading down about 43. Points -- -- from the street thanks so much out have a great weekend you tip.

This transcript has been automatically generated and may not be 100% accurate.

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