U.S. Economic Slowdown to Extend, Weekly Loss of 2.3% in S&P 500

Nichole Harper
27 Mar, 2015
New York City

Stocks on Wall Street struggled and S&P 500 index is set to close down 2.3% and the Nasdaq by 2.9% for the week. Economic growth in the fourth-quarter was held at 2.2% in the final estimate and for all of 2014 the U.S. economy slowed to a growth of 2.2% from 2.4% in 2013.

[R]1:10 PM New York – Stocks on Wall Street struggled and S&P 500 index is set to close down 2.3% and the Nasdaq by 2.9% for the week. Economic growth in the fourth-quarter was held at 2.2% in the final estimate and for all of 2014 the U.S. economy slowed to a growth of 2.2% from 2.4% in 2013.[/R]

Stocks on Wall Street struggled after the latest economic growth revision failed to match economists’ expectations.

The Commerce Department said U.S. economy slowed in the final three months of 2014 and the slowdown is likely to continue in the first quarter of this year.

GDP, the widest measure of goods and services generated across the economy, rose at a seasonally adjusted annual rate of 2.2% in the fourth quarter, matching the previous estimate.

Several economists surveyed by ticker.com were looking for the growth rate to be as high as 2.35%.

For all of 2014, the GDP grow slowed to 2.2% from 2.4% in 2013.

The economy expanded at 5% annual rate in the third quarter and businesses slowed on inventory building and capital expenditure.

The weakness is likely to persist in the first quarter because of harsh weather, strikes at ports on West Coast and ongoing price fall in energy markets.

However, corporations are expanding payrolls and that is likely to sustain consumer spending.

Corporate after-tax profit, excluding depreciation and inventory, declined 3% from the third quarter in the final three months of the year and decline was the largest since the first quarter in 2011.

Profits at corporations increased 2.9% from a year ago in the fourth-quarter after expanding at 5.1% annual rate in the third quarter.

For the entire 2014, after-tax profits at corporations fell 8.3%, the largest annual decline since 2008.

On Wall Street trading, Tollbooth Strategy Index slid 0.02% or 1.82 to 10,414.32.

S&P 500 index edged up 1.28 or 0.06% to 2,057.32 and the Nasdaq Composite Index rose 11.18 or 0.2% to 4,874.51.

Crude oil in New York trading slipped $1.51 to $49.92 a barrel and gold declined $4.90 to $1,199.90 an ounce.

U.S. Movers

BlackBerry Ltd ((BBRY)) jumped 3% or 29 cents to $9.59 after the Canada-based mobile company reported revenues in the fourth-quarter ending in February plunged 32.4% to $660 million from a year ago period.

Net in the quarter swung to a profit $28 million compared to a loss of $423 million and diluted earnings per share swung to 5 cents from a diluted loss per share of 80 cents.

GameStop Corp ((GME)) decreased 1.5% or 60 cents to$38.19 after the consumer electronics and wireless services retailer reported total sales in the fourth-quarter ending in January dropped 5.6% to $3.48 billion from a year ago period.

Comparable store sales in the quarter slipped 1.8%.

Net income in the quarter surged 10.7% to $244.1 million or $2.23 per diluted share compared to $220.5 million or $1.89 from the same quarter last year.

GameStop forecasted comparable store sales for the first-quarter to increase in the range of 2.5% to 5.5% and net income between $58 million and $65 million and diluted earnings per share to increase between 53 cents to 60 cents.

European Markets

In London trading, FTSE 100 index slipped 0.7% or 45.34 to 6,849.99 and in Frankfurt the DAX index rose 0.2% or 22.07 to 11,865.75.

In Paris, CAC 40 index gained 0.4% or 18.03 to 5,024.38.

For the week, FTSE 100 index declined 2.4% and in Frankfurt the DAX index slumped 1.5%.

In Paris, CAC 40 index slipped 1.1%.

BHF Kleinwort Benson Group fell 0.9% to €4.46 after the Belgium-based financial services provider said revenues in the year ending in December surged 118.5% to €209.8 billion from €96 billion in a year ago period.

Net in the year swung to profit from a year ago to €71.6 million compared to a loss of €66.4 million and diluted earnings per share jumped to €0.67 from €0.17.

The company said assets under management climbed 9.4% to €54.2 billion and operating income increased by €4.7 million or 1.4% to €334.6 million from a year ago period.

Royal Bank of Scotland Group Plc slipped 1.5% to 345.20 pence after the U.K.-based financial services provider agreed to sell its internationally managed Private Banking and Wealth Management business to Switzerland-based Union Bancaire Privee UBP SA for Sfr350 million to about Sfr400 million francs.

Separately, the bank’s subsidiary National Westminster Bank Plc today reported net interest income in the year ending in December climbed 13.9% to £4.58 billion from £4.02 billion in a year ago period.

Net in the year swung to profit from a year ago to £1.73 billion compared to a loss of £5.96 billion.

Asian Markets

Nikkei index declined and extended losses for the week to 1.4% after the latest inflation data fell short of expectations. The weak fuel prices dragged the overall inflation below the Bank of Japan target.

Market indexes in Tokyo extended losses and for the week the Nikkei index lost 1.4%.

The latest measure of inflation showed consumer prices rose 2% in February from a year ago, 21st monthly increase in a row, the government said.

The consumer price index in February dropped 0.2% to 102.9 from the previous month but climbed 2.2% from a year ago month, the Ministry of Communications and Internal Affairs said.

The department added prices for food soared 4.1% followed by 3.5% increase in clothing, fuel and recreation.

The core consumer prices for Tokyo area rose 2.2% from a year ago as the index increased to 101.9, the ministry said today.

Preliminary consumer price index for Ku-area of Tokyo in March jumped 0.4% to 102.1 from February and advanced 2.2% from a year ago.

Average monthly household spending in February declined after adjusting for inflation by 2.9% to 265,632 yen, a decline for the 11th month in a row.

Household income declined 0.7% to an average of 488,519 yen, a fall for the 17th month in a row.

The Nikkei 225 Stock Average slumped 185.49 or 0.9% to 19,285.63 and the broader Topix index decreased 16.04 to 1,552.78. For the week, Nikkei 225 dropped 1.4%.

The yen closed at 119.46 against a dollar.

Stocks in Mumbai struggled to advance as investors began to turn cautious and rupee firmed after a week of tumultuous trading.

Market indexes are likely to face headwinds in the next two months as corporate balance sheets remain stretched and banks are struggling with non-performing loans.

The near 3% correction this week in Mumbai trading may be sending signal for the future correction and market indexes are likely to face a deeper correction of as much as 10%.

The market rally, after the national election last year, is struggling to extend as corporations are struggling with aggregate demand, regional and smaller banks are dealing with balance sheet issues and consumers are still facing rising food prices.

Infrastructure stocks had shot up nearly 100% during the election rally and next downturn in market indexes is expected to be led by the sector, banks and capital goods stocks.

In addition, today six largest wireless carriers in India committed to $16.5 billion in spectrum auction by the central government. Bharti Airtel, Idea Cellular and Vodafone led the auction with the commitment of $4 billion each.

Rupee gained 17 paisa 62.50 against one dollar.

The Sensex Index added 1.06 to close at 27,458.64. The CNX Nifty slid 0.75 to 8,341.40.

For the week, Sensex Index declined 2.8% and CNX Nifty dropped 2.6%.

Bharti Airtel Limited plunged 5.6% to ₹376.20 and the largest wireless service provider acquired 111.6 megahertz of telecom spectrum and 2100 megahertz bands worth ₹29,130 crore by the Government of India.

Reliance Communications Limited dropped 3.6% to ₹58.25 after the second-largest mobile operator plans to bid ₹4,299 crore in telecom spectrum auction.

Reliance Industries Limited slipped 2.3% to ₹811.75 and the conglomerate’s subsidiary acquired the telecom spectrum worth ₹10,077.53 crore in 13 key circles across India.