Wall Street Lunch: U.S. Growth Revised Lower While Core PCE Stays Hot (NYSE:UMAC)

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U.S. GDP growth slowed as inflation pressures remained elevated. (0:15) Drone stocks up on Trump administration defense funding. (1:29) Lamborghini defends abandoning EV plans as luxury buyers favored hybrid vehicles. (2:35)

This is an abridged transcript of the podcast:

Our top story so far, GDP was revised lower for Q1 to a 1.6% annual rate, versus 2% in the initial estimate and 0.5% in the prior quarter.

The downward revision primarily reflected weaker investment and consumer spending.

Overall, GDP was supported by increases in government spending and exports, along with faster investment growth, partly offset by slower consumer spending.

David Laut of Kerux Financial said the stability in economic growth “suggests that interest rates at their current levels are justified.”

Meanwhile, the April core PCE price index showed inflation remains well above the Fed’s 2% target.

The index rose 0.2% for the month, a touch below the 0.3% estimate, but increased 3.3% annually, in line with consensus and slightly hotter than March’s 3.2% pace.

Consumers continued to spend despite persistent inflation, though income growth was flat.

Economist Joseph Brusuelas said Americans are “so upset right now” because of three straight monthly declines in disposable income growth and weakness in that same measure over the past year.

“Real wages are falling as disposable income declines and households are drawing down savings,” he said. “With rising inflation not having yet peaked this will get worse before it gets better and real spending is likely to decline in May.

Among active stocks, drone-related stocks are rallying after The Wall Street Journal reported that the Trump administration is considering funding agreements with several companies as part of a broader push to expand domestic production and reduce costs for the increasingly important defense technology.

Unusual Machines (UMAC) is up 50%, while Red Cat Holdings (RCAT), AeroVironment (AVAV), Kratos Defense & Security Solutions (KTOS), AgEagle Aerial Systems (UAVS), ZenaTech (ZENA), Ondas Holdings (ONDS) and Airo Group (AIRO) are also moving higher.

Best Buy (BBY) is rallying after beating estimates with its Q1 earnings report and issuing solid full-year guidance.

Best Buy sees full-year revenue of $41.2 billion to $42.1 billion, versus the $41.8 billion consensus estimate, and adjusted EPS of $6.30 to $6.60, versus $6.48 expected.

And Dollar Tree (DLTR) is rallying after reporting Q1 sales growth of 7.3%.

Same-store sales for the Dollar Tree banner rose 3.5%, topping the 3.2% consensus estimate.

The gain was driven by a 4.5% increase in average ticket, partly offset by a 1% decline in traffic.

And in other news of note, Lamborghini CEO Stephan Winkelmann said the automaker’s decision to scrap its EV plans was “the right way to go” after Ferrari’s new electric vehicle faced backlash over its design.

“The decision to go from the internal combustion engine to plug-in was a very important one for us, and it worked out,” he told CNBC.

“We don’t speak about our competitors… but everybody has their own strategy.”

Lamborghini, which is owned by Volkswagen (VWAGY), abandoned plans for an all-electric Lanzador and a fully electric version of its Urus SUV.

“By observing the market… we saw that the acceptance curve (of EVs) for our type of customers is not increasing, and therefore, we decided to move away from a full-electric car into a plug-in hybrid,” Winkelmann said.

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