U.S. Economic Growth Slows, Amazon Returns to Profit

Nichole Harper
30 Jan, 2015
New York City

U.S. economic growth in fourth quarter was 2.6% and for all of 2014 was 2.4%. Stocks on Wall Street traded lower after slower than expected growth in the quarter. Russian ruble plunged 4% after central bank abruptly lowered rate by 200 basis points.

[R]1:50 PM New York – U.S. economic growth in fourth quarter was 2.6% and for all of 2014 was 2.4%. Stocks on Wall Street traded lower after slower than expected growth in the quarter. Russian ruble plunged 4% after central bank abruptly lowered rate by 200 basis points.[/R]

Market indexes in New York traded lower after the fourth quarter economic growth was lower than expected and Russia abruptly increased interest rate.

Market indexes opened higher and quickly descended down 1% after gross domestic product was weaker than expected in the fourth quarter. Investors also digested earnings from Amazon, Google, MasterCard and others.

On Wall Street trading, Tollbooth Strategy Index fell 0.1% or 11.30 to 10,013.98.

S&P 500 index slipped 18.25 or 0.9% to 2,002.38 and the Nasdaq Composite Index dropped 25.44 or 0.5% to 4,657.97.

Gross domestic product increased at 2.6% annual rate in the fourth-quarter, slower than 5% increase in the third-quarter, Department of Commerce reported today.

For the year 2014, the U.S. economy expanded at 2.4% rate, slightly above the 2.2% rate in 2013.

Consumer spending was the driver of the economic growth in the fourth quarter, expanding at 4.3% and the fastest pace since 2006.

Russian Ruble Plunges 4%

Russian ruble took another hit and closed down 2% to 70.15 against one dollar and fell 2.4% to 79.55 per euro. The currency recovered from the loss of as much as 4.3%.

Russian government bond due January 2028 increased for the third day in a row sending the yield lower by 31 basis points to 13.39%.

Central bank governor Elvira Nabiullina appears to have come under pressure from the government and banking community after rates were raised sharply in mid-December to arrest rising capital flight.

The Bank of Russia noted in a statement that the recent surge in inflation to 11.4% in December is expected to slow in a year.

“Cutting the by two percentage points will provide an opportunity to restart lending to real economy,” Nabiullina said in a statement.

U.S. Movers

Amazon.com, Inc ((AMZN)) climbed 11.2% or $34.99 to $346.74 after the online market place operator reported net sales in the fourth-quarter ending in December jumped 15% to $29.33 billion a year ago period.

Net income in the quarter declined 10.5% to $214 million or 45 cents a diluted share compared to $239 billion or 51 cents from the same quarter last year.

Amazon forecasted net sales in the first-quarter between $20.9 billion and $22.9 billion or an increase in the range of 6% to 16%.

Amazon had reported losses in the previous two quarters and for all of 2014 the company reported a loss.

Google Inc ((GOOG)) climbed 3.6% or $18.09 to $528.75 after the search engine service provider reported total revenues in the fourth-quarter ending in December climbed 15% to $18.1 billion a year ago period.

Net income in the quarter jumped 40.8% to $4.76 billion or $6.91 a diluted share compared to $3.38 billion or $4.95 from the same quarter last year.

The company said revenue from owned sites soared 18% to $12.43 billion and revenues from partner sites jumped 6% to $3.72 billion and other revenues climbed 19% to $1.95 billion from a year ago.

MasterCard Inc ((MA)) gained 1.5% or $1.21 to $82.57 after the credit and debit card payment services provider reported total revenues in the fourth-quarter ending in December surged 13.6% to $2.42 billion a year ago period.

Net income in the quarter surged 28.6% to $801 million or 69 cents a diluted share compared to $623 million or 52 cents from the same quarter last year

European Markets

In London trading, FTSE 100 index fell 0.2% or 12.73 to 6,797.87 and in Frankfurt the DAX index slid 0.1% or 14.54 to 10,723.33.

In Paris, CAC 40 index slipped 0.4% or 17.94 to 4,613.49.

BT Group Plc dropped 2% to 420.50 pence after the U.K.-based communications service provider reported revenues in the third-quarter ending in December fell 3% to £4.75 billion from £4.60 billion a year ago period.

Profit in the quarter surged 12% from a year ago to £694 million compared to £617 million and diluted earnings per share rose to 6.9 pence from 6.3 pence.

For the year, BT Group forecasted earnings before interest, tax, depreciation and amortization, excluding exceptional items of between £6.2 billion and £6.3 billion.

Novo Nordisk A/S fell 0.6% to 298 kronor after the Denmark-based pharmaceutical products maker reported sales in the fourth quarter ending in December climbed 13.3% to 24.59 billion kronor from 21.70 billion kronor a year ago period.

Net profit in the quarter jumped 7.9% from a year ago to 6.53 billion kronor compared to 6.05 billion kronor and diluted earnings per share increased to 2.51 kronor from 2.27 kronor.

For the year, sales soared 6% to 88.8 billion kronor and net profit increased 5% to 26.5 billion kronor and diluted earnings per share jumped 8% to 10.07 kronor.

The company forecasted sales for the year in the range of 6% to 9% in local currencies and a net loss of about 5 billion kronor.

Asian Markets

Stocks in Tokyo closed higher after industrial production jumped 1% and inflation was below target set by the Bank of Japan.

Jobless rate in December was unchanged at 3.4% and housing starts dropped 9%, first monthly decline in five years.

Stocks in Tokyo closed higher after the release of monthly jobless rate, inflation and industrial production data.

In addition, housing starts declined for the first time in five months in December.

The Ministry of Economy, Trade and Industry said seasonally adjusted industrial production in December jumped 1% followed by 0.5% contraction in November.

For the year, output increased 0.3% after falling 3.7% in the previous month.

The Ministry of Internal Affairs and Communications reported seasonally adjusted unemployment rate in December was unchanged at 3.4% and the number of unemployed persons in December was 2.1 million, a decrease of 6.7% from a year ago month.

Separately, the department said consumer price index in December rose 0.1% to 103.3 from the previous month and jumped 2.4% from a year ago month.

The Ministry of Land, Infrastructure, Transport and Tourism reported housing starts in December slightly increased 14.7% from 14.3% gain in November.

For the year, housing starts dropped 9% compared to the surge of 11% in the month a year ago and declined for the first time in five years.

The Nikkei 225 Stock Average gained 68.17 or 0.4% to 17,674.39 and the broader Topix index edged up 1.49 to 1,415.07.

For the week, Nikkei 225 increased 0.9% and for the month jumped 1.3%.

The yen closed at 117.92 against one dollar.

Stocks in Mumbai sold off and banks led the decliners and the government priced its stake in Coal India.

Central government of India sold 10% stake in the largest coal miner and lowered its stake to 80% and raised ₹22,000 crore. The offering was oversubscribed by institutional investors but retail investors avoided the offering.

Of the allotted shares, institutional investors’ bids were 1.2 times oversubscribed and retail tranche of the offering received only 44% interest.

However, banks sold off after Bank of Baroda reported sharply higher reserves for bad loans. The economic slowdown in the last two years has led to a sharp jump in non-performing loans at public sector banks.

Bank of Baroda plunged 11%, Oriental Bank, Bank of India and State Bank of India declined between 5% and 6%.

Indian rupee closed at 61.86 against one dollar.

The Sensex Index declined 498.82 or 1.7% to close at 29,182.95. The CNX Nifty slipped 143.45 or 1.6% to 8,808.90.

For the week, Sensex jumped 0.7% and for the month surged 6.6% and for the week, CNX Nifty climbed 0.7% and for the month soared 6.9%.

Bank of Baroda plunged 11.1% to ₹193.35 after the second largest public sector bank reported net in the third-quarter tumbled 68.12% to ₹333.98 crore.

Total revenues climbed 11.16% to ₹11,808.34 crore.

ICICI Bank Limited tumbled 4.9% to ₹361.15 after the largest private sector lender said net in the third-quarter jumped 14.09% to ₹2,889.04 crore. Net revenues increased 8.91% to ₹15,526.88 crore.

The net non-performing assets in the December quarter jumped 1.27% to ₹4,831 crore from 1.09% to ₹3,997 crore in previous quarter and ₹3,121 crore in same period last year.

NTPC Limited advanced 1.4% to ₹143.80 after the power generation company reported net in the third-quarter gained 7.43% to ₹3,054 crore.

Revenues rose 1.27% to ₹19,339.37 crore.