By Carlos Guillen

Equity markets are surprisingly doing well today despite economic data showing that the U.S. produced less than expected in the first quarter and that initial claims rose more than predicted. Off the bat, stocks should have been heading lower today after the Nikkei Stock Average plunged 5.2 percent yesterday, but the Dow Jones Industrial Average is up fairly well, over 50 points.

On the jobs front, According to the Department of Labor, initial claims during the week ended May 25 totaled 354,000, increasing from the 344,000 revised figure reported for the prior week and landing above the Street's estimate of 340,000. However, it was reported that there were estimates made for five states, so the numbers are not definitive. The initial claims' four-week moving average was 347,250, increasing from the prior week's average of 340,500, still below the 350,000 level which economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month.

On the housing front, the number of prospective buyers signing contracts to buy previously-owned homes ticked up last month to the highest level in three years. According to the National Association of Realtors, pending home sales during April increased to a reading of 106, up 0.3 percent from the previous month and a gain of 10.3 percent from a year earlier, another sign the housing market's rebound is well underway: more on this below.

Also perhaps a bit negative was that according to the Bureau of Economic Analysis, real gross domestic product (GDP) during the first quarter of 2013 increased quarter-over-quarter by 2.4 percent (annualized), worse than the Street's consensus estimate calling for a 2.5 percent quarter-over-quarter rise, but still higher than the 0.4 percent achieved in the fourth quarter of 2012. On the positive side, it was very encouraging to see that consumption increased 3.4 percent, revised from 3.2 percent, making 13 quarters of consistent growth. However, a second sharp drop in government spending served to attenuate overall GDP growth. In fact, consumer spending contributed 2.4 percentage points to total GDP, while government spending took away 0.97 percentage points.

On the inflation side, prices for GDP increased by 1.1 percent (annualized), while economists' average forecast called for a 1.2 percent rise. The slower than expected rise in prices may still serve to continue giving the Fed the impetus it needs to maintain its loose monetary policy trajectory.

In all, it is very encouraging to see that stocks are holding up despite not so good economic data points from here at home and despite Japan's stock market dip. Tomorrow should be quite climactic as Chicago PMI and Michigan Sentiment could shake markets in either direction.

Pending Home Sales
By David Urani

Pending home sales for April showed an increase of 0.3% in April, which was a little bit disappointing compared to the consensus estimate of a 1.4% increase. A big factor during the month was a 7.6% decline in the West. The NAR reports that inventory shortages in the West were a big contributor to the decline there. One thing in particular that's been happening in the West is new rules for foreclosures may have slowed the pipeline of distressed inventory; not only may this be constraining the supply of homes further but it may also be artificially lifting average home prices in the region (since those homes tend to be cheaper).

Considering some of the concerns over rising mortgage rates, which look to be headed on their way back above 4%, and a big decline in lumber prices (people will speculate how much of it is demand, while overproduction and soft exports certainly are major drivers), this flattish result for pending home sales isn't necessarily going to settle any nerves over housing. Nevertheless, it was still a modest increase so anyone looking for a housing derailment doesn't have much to work with here.