U.S. GDP Growth Stalls, As Promised Fed Trims Bond Purchases

Nichole Harper
30 Apr, 2014
New York City

U.S. growth slowed to 0.1% in the first quarter as harsh winter weather affected investment plans and exports declined. Personal consumption has been driving the economic growth but stagnating wages and weak employment is likely to keep the economic growth in check. Fed trims bond purchase again.

[R]2:55 PM New York – U.S. growth slowed to 0.1% in the first quarter as harsh winter weather affected investment plans and exports declined. Federal Reserve trimmed its bond purchase program as expected after a 2-day meeting that ended today.[/R]

U.S. stocks opened sharply lower after preliminary estimate of the March quarter economic growth was sharply lower than expected.

Also, Twitter, eBay and Exelon reported weaker than expected quarterly results.

S&P 500 index increased 1.15 to 1,879.48 and Nasdaq Composite decreased 8.08 to 4,095.57.

Gross domestic product in the March quarter increased 0.1% annualized rate compared to 2.6% gain in the previous quarter, according to the data released from the Commerce Department today.

The growth was considerably weaker than expected 1% increase after much of the northern region of the nation battled harsh winter conditions for two months. The growth data are preliminary and will be revised two more times.

Investors also awaited Fed policy makers decision at the end of a two-day meeting and the central bank is expected to announce a cut in its bond buying program to $45 billion from $55 billion.

Fed Cuts Bond Purchase Plan

The Federal Open Market Committee at the end of 2-day meeting that ended today announced to cut bond purchase program as expected.

The committee approved the plan to trim the purchase of Treasury and mortgage-backed securities by $10 billion to $45 billion a month beginning in May.

The Fed has reduced its monthly purchase by $10 billion at each meeting to $55 billion in April from $85 billion in December. The Fed has said it plans to end all bond purchases by the end of this year.

The accompanying statement did not offer any new insights about the next steps that the central bank is likely to pursue and when the rates are likely to rise again from the historic low of zero since December 2008.

European Markets

In London trading, FTSE 100 index edged up 0.04% or 2.43 to 6,772.34 and in Frankfurt the DAX index rose 0.1% or 11.60 to 9,595.72.

In Paris, CAC 40 index fell 0.4% or 18 to 4,479.68.

Banco Bilbao Vizcaya Argentaria SA fell 1.4% to €8.82 after the Spain-based financial services provider said total revenue in the first-quarter ending in March declined 6.8% to €5.05 billion from €5.42 billion a year ago.

Net income in the quarter tumbled 64% to €624 million compared to €1.73 billion a year earlier.

Daimler AG decreased 1.8% to €66.61 after the Germany-based automobile company stated revenue in the first-quarter ending in March climbed 13% to €29.46 billion from €26.10 billion a year ago period.

Net income in the quarter surged 93% to €1.09 billion compared to €564 million and earnings per share jumped to €0.96 from €0.50 a year ago.

Asian Markets

Stocks in Tokyo closed higher in choppy trading and the yen closed nearly unchanged as tensions between Russia and West remained high and President Obama focused his Asia trip on the rising military strength of China.

The Nikkei 225 Stock Average rose 15.88 to 14,304.11 and the Topix index gained 1.70 to 1,162.44. For the month, Nikkei 225 declined 2.7%.

The yen closed at 102.37 against the U.S. dollar.

Nikkei index in Tokyo close higher and investors focused on domestic earnings. Daiwa Securities and Nomura Holdings reported a sharp jump in annual earnings.

Fujitsu Limited quarterly net swung to profit. Japan Airlines annual net revenues increased 5.7%.

U.S. Stocks in Review

eBay Inc ((EBAY)) plunged 5.1% or $2.79 to $51.75 after the online marketplaces provider reported revenue in the first-quarter ending in March soared 14% to $4.3 billion.

Net in the quarter swung to a loss $2.3 billion or $1.82 a diluted share compared to a profit of $677 million or 51 cents.

eBay said total company enabled commerce volume in the quarter climbed 24% to $58 billion. Mobile e-commerce volume surged 70% to $11 billion representing 19% of volume.

Mobile apps downloads since inception exceeded 240 million and attracted 6.5 million new customers in the quarter. Cross-border trade grew 24%, representing $13 billion, or increased 22%.

Time Warner Inc ((TWX)) gained 1.1% or 72 cents to $65.46 after the media conglomerate provider reported revenue in the first-quarter ending in March jumped 10% to $7.54 billion.

Net income in the quarter climbed 71% to $1.29 billion or $1.42 a diluted share compared to $754 million or 79 cents.

Twitter Inc ((TWTR)) plummeted 10.1% or $4.31 to $38.32 after the social media platform provider said revenue in the first-quarter ending in March climbed 119% to $250 million.

Net loss in the quarter widened to $132.4 million or 23 cents a diluted share compared to $27 million or 21 cents.