U.S. Growth at 2.8% on Inventories, Surprise Rate Cut in Europe

Nichole Harper
07 Nov, 2013
New York City

U.S. stocks and indexes drifted lower on stretched valuation worries. U.S. economic growth accelerated to 2.8% in the third quarter from 2.5% in the second quarter. Weekly jobless claims declined 9,000 at the end of last week. European Central Bank trimmed benchmark rate to 0.25%.

[R]11:40 AM New York – U.S. stocks and indexes drifted lower on stretched valuation worries. U.S. economic growth accelerated to 2.8% in the third quarter from 2.5% in the second quarter. Weekly jobless claims declined 9,000 at the end of last week. European Central Bank trimmed benchmark rate to 0.25%.[/R]

Stocks on Wall Street drifted lower as investors digest another flood of earnings and economic data.

U.S. economic growth in the third quarter accelerated to 2.8% from 2.5% in the second quarter and weekly jobless claims in the last week declined 9,000.

Market indexes declined after investors worried about the decline in consumption component of the economy and worries of the stretched valuation crept up.

S&P 500 index declined 0.7% or 12.78 to 1,757.71 and Nasdaq Composite Index declined 52.96 or 1.35% to 3,878.99.

The popular microblogging site operator Twitter opened at $45.10 after it priced 70 million shares at $26 a share.

The public offering was oversubscribed 30 times and the company is expected to have 544.7 million shares outstanding and including all restricted stocks and options the total count increases to 694.8 million.

The loss making company is valued at 12.4 times 2014 estimated sales compared to 11.6 times Facebook sales and 12 times LinkedIn sales.

Twitter agreed to pay at least 3.2% fee to underwriters to raise $1.82 billion, totaling $59.2 million pay day for an underwriter team led by Goldman Sachs.

U.S. Economic Growth Accelerates to 2.8%

Gross domestic product increased at an annual rate of 2.8% in the quarter to September from a 2.5% growth in the June quarter, Commerce Department data released today showed.

The expansion was driven by an increase in inventories and consumption slowed and business investment also declined.

In a separate report released by the Labor Department, weekly jobless claims declined 9,000 to 336,000 in the week ending on November 2. Initial claims in the previous week were 345,000.

ECB Lowers Rates

In London trading, FTSE 100 index increased 0.2% or 15.64 to 6,758 and in Frankfurt the DAX index jumped 1.5% or 131.34 to 9,172.

In Paris, CAC 40 index gained 1.3% or 55.63 to 4,343.

The European Central Bank lowered its benchmark rate to a record low after inflation declined to the lowest rate in four years.

ECB President Mario Draghi trimmed interest rate to 0.25% to 0.5% and the central bank is running out of conventional options to support economic growth.

Inflation in the euro zone is running at half the target range established by the central bank and unemployment in the region is also at the highest level since the currency bloc formation in 1999.

U.S. Stocks in Review

American Eagle Outfitters Inc ((AEOS)) soared 8% to $15.56 after the teen retailer reported better than expected operating margins and estimated third-1uarter earnings declined to 19 cents a share, less than expected.

J.C. Penney ((JCP)) increased 6.5% to $8.14 after the retailer reported comparable store sales increased 0.9% in October, a turnaround from the continuous decline since the last increase in December 2011.

SolarCity Corp ((SCTY)) plunged 10% to $53.34.

Transocean Ltd ((RIG)) increased 4% to $50.44 reported third-quarter adjusted earnings of $1.37 a share, higher than $1.07 a share expected by many analysts.

Twitter Inc completed its initial public offering of 70 million shares at $26 each that valued the short message service platform operator at 12.4 times estimated 2014 sales of $1.4 billion.