Stocks on Wall Street Trade Lower Despite Second Quarter Economic Rebound

Nichole Harper
30 Jul, 2014
New York City

Stocks on Wall Street edged lower after the initial estimate of the second quarter economic growth came in at 4%. Markets turned lower ahead of Fed statement in the next hour and corporate earnings were mixed. Twitter soared 21% on larger than expected advertising revenues.

[R]1:50 AM New York – Stocks on Wall Street edged lower after the initial estimate of the second quarter economic growth came in at 4%. Markets turned lower ahead of Fed statement in the next hour and corporate earnings were mixed.[/R]

Stocks on Wall Street edged lower despite the preliminary reading on the second quarter economic growth was ahead of expectations. Investors focused on the Fed statement scheduled to release at 2 p.m. ET.

Tollbooth Index, a measure of companies with rising bargaining power, edged up 0.01% or 0.97 to 9,462.30.

S&P 500 index declined 3.91 to 1,966.04 and the Nasdaq Composite Index rose 9.77 to 4,452.47.

U.S. Q2 Growth at 4%

U.S. gross domestic product, the broadest measure of the economy, advanced at an annual rate of 4% after adjusting for seasonal factors, the Commerce Department said today.

The growth in the quarter was a sharp reversal from the first quarter shrinkage of revised 2.1% from the previous estimate of 2.9%.

The annual rate of 4% or better has been achieved only four times in the last forty quarters dating back to the first quarter of 2004.

The government also revised data dating back to 2011. Second half 2013 growth rate was revised higher to 4% but figures for previous years showed weaker than previous estimates and uneven recovery. The latest economic expansion is one of the weakest since World War II.

The preliminary estimates are generally a suspect because they are based on healthcare spending and trade flows which are always revised in the subsequent two estimates.

In the second quarter, consumer spending rose 2.5% annual rate after harsh winter conditions in the first quarter and businesses restocked inventories and added 1.66 percentage points to the quarterly growth.

Business spending on equipment increase at 7% annual rate in the second quarter reversing the decline in the first. And residential fixed investments soared at 7.5% rate and reversed the decline in the previous two quarters.

International trade remained a drag on the overall economy despite the surge of 9.5% in U.S. exports but imports also soared 11.7% in the period.

Federal government outlay declined for the seventh quarter in a row but governments at state and local levels increased spending and total government spending at all levels increased at 1.6% in the second quarter.

U.S. Movers

Amgen Inc. ((AMGN)) soared 5.8% or $7.07 to $130.38 after the biopharmaceutical company stated total revenues in the second-quarter ending in June jumped 21% to $5.2 billion from a year ago period.

Net income in the quarter climbed 23% to $1.55 billion or $2.01 a diluted share compared to $1.26 billion or $1.65 from a same quarter last year.

Twitter Inc ((TWTR)) surged 21.5% or $8.28 to $46.82 after the social media network service provider reported revenue in the second-quarter ending in June soared 124% to $312 million from a year ago period.

Net loss in the quarter widened to $144.6 million or 24 cents a diluted share compared to $42.2 million or 32 cents from a year earlier.

The company said average monthly active users in the quarter climbed 24% to 271 million and mobile users surged 29% to 211 million. Advertising revenue in the second quarter per thousand timeline views reached $1.60 and soared 129% from a year ago quarter to $277 million.

European Markets

Markets in Europe traded lower after companies missed earnings target and Sweden reported weak economic growth data.

Gross domestic product in Sweden increased 0.2% in the June quarter after contracting 0.1% in the previous quarter, Statistics Sweden said today. The preliminary report is likely to be revised but the economic growth has lagged in the first-half and economists are lowering estimates for the second half.

In London trading, FTSE 100 index fell 0.2% or 12.31 to 6,795.44 and in Frankfurt the DAX index edged up 0.02% or 2.13 to 9,655.76.

In Paris, CAC 40 index slid 0.2% or 9.13 to 4,356.4.

AstraZeneca agreed to acquire Spain-based Almirall for $2.1 billion. Barclays profit soared 68% to £1.1 billion but revenue plunged 12%. Bayer net climbed 13% to €953 million. ITV profit surged 40% to £250 million. Travis Perkins net jumped 16% to £123 million.

Asian Markets

Stocks in Japan advanced and industrial production in June decreased for the second month in a row.

The Ministry of Economy, Trade and Industry said industrial output in June declined 3.3% following the 0.7% in May. On a yearly basis, industrial production climbed 3.2% from a year ago month.

Shipments decreased 1.9% on a monthly basis in June, sixth monthly decline in a row and inventories in the month increased 1.9%, an increase for the second month in a row.

Businesses and households are adjusting to the latest sales tax increase in April to 8% from 5% and monthly decline in industrial production was the largest since the 2011 earthquake and tsunami.

The Nikkei 225 Stock Average rose 28.16 or 0.2% to 15,646.23 and the broader Topix index edged up 1.83 to 1,292.24.

The yen closed at 102.22 against one U.S. dollar.

The Sensex Index increased 111.75 or 0.4% to close at 26,102.98 The CNX Nifty rose 42.70 to 7,791.40.

Bharti Airtel, one of the largest wireless telecom operators in India and Africa reported larger than expected profit on rising subscriber growth in India and higher sale of smart phones.

Bharti Airtel Limited soared 5.3% to Rs 373 after net profit in the first-quarter surged 60.9% to Rs 1,108.50 crore and total revenues jumped 13.3% to Rs 22,962 crore.