GOOD MORNING! An upside surprise in the 2nd quarter GDP release and slightly better jobless claims data turn a risk-off trade to a risk-one. Prior to the releases global sovereign debt and US Treasuries were rallying a unexpected Chinese rate cut, a decline in German confidence indexes, giving concerns about the global growth outlook. The first estimate of the 2nd quarter GDP posted an annualized quarterly growth rate of 2.8% versus a consensus estimate of 2.0%. This follows a 1.4% annualized growth quarterly rate of growth in the first quarter, suggesting that economic activity accelerated and boosting optimism that the Fed may pull off a soft landing. Treasury yields began an upward drift and turned the curve steepening trade to a curve flattening trade, at least for the day. Stock index futures and the cash market in stocks were lifted from a downward drift following the data, but they began to fade again in the afternoon with the NSADQ and S&P ending back in the red.
      Stocks are trying to rebound in early trading based on stock index futures. Treasuries are narrowly mixed ahead of the last highlighted economic release before next week’s FOMC meeting. Most of the focus will be on the PCE Deflators, which are expected to be benign. Yesterday’s GDP report may have stolen some of the thunder on personal spending, leaving income and savings to be monitored. Since volatility has been a major theme in the markets, an exaggerated reaction in the markets may be likely. Also due is the University of Michigan Consumer Sentiment Index. The Fed will also be looking at the consumers’ expectations on inflation contained in the report. After that, it will be positioning for the weekend.