U.S. Economy Swings to Contraction on Second Estimate, Soft World Markets

Nichole Harper
29 May, 2015
New York City

Indexes on Wall Street rebounded from the near 1% decline in late morning and the U.S. government downwardly revised its economic growth assessment. Resurgent dollar and unusually cold weather played key roles in the revised estimate. European markets struggled on mixed messages on Greek talks.

[R]1:40 PM – Market indexes on Wall Street rebounded from the near 1% decline in late morning and the U.S. government downwardly revised its economic growth assessment. Resurgent dollar and unusually cold weather played key roles in the revised estimate. European markets struggled on mixed messages on Greek negotiations.[/R]

Market indexes on Wall Street traded lower and the government revised its assessment of economic growth in the first quarter.

The U.S. economic growth was revised to shrink 0.7% in the first-quarter. Real GDP in fourth-quarter jumped 2.2%., the Department of Commerce said.

The latest downward revision reflected a smaller buildup in inventories by corporations than previously estimated and a modest downward revision in consumer spending.

Economy in the first quarter struggled on inclement weather and a resurgent dollar and disruptions at West Coast ports.

In the current economic activities have modestly rebounded and the latest data housing industry and business spending plans indicated a potential momentum building in the economy.

On Wall Street, Tollbooth Strategy Index slipped 0.5% or 58.62 to 10,721.51.

S&P 500 index dropped 0.5% or 10.25 to 2,110.52 and the Nasdaq Composite Index fell 0.4% or 18.22 to 5,080.09.

Crude oil in New York jumped $1.88 to $59.56 a barrel and gold rose 80 cents to $1,189.60 an ounce.

U.S. Movers

Equinix Inc ((EQIX)) slipped $1.77 to $267.42 after the networking services provider agreed to acquire the U.K.-based smaller rival Telecity Group in a deal worth $3.6 billion or £2.35 billion, represents a premium of approximately 27.3 percent to the price on May 6.

Under the terms, shareholder of Telecity will receive 572.5 pence in cash and 0.0327 new Equinix shares.

The transaction is expected to close in first-half of 2016.

Intel Corporation ((INTC)) gained 1.3% or 47 cents to $34.47 after the the New York Post reported computer processors maker is near to acquire smaller chip maker Altera Corporation for about $15 billion, a 15% premium over Altera''s yesterday’s closing price of $46.97.

In April, Altera rejected an unsolicited offer for $54 per share from Intel and it signed standstill agreement earlier this year with Altera that expires on June 1.

The newspaper said ""deal is likely by the end of next week.""

Ulta Salon, Cosmetics & Fragrance, Inc. ((ULTA)) fell 0.7% or $1.33 to $155.02 after the beauty retailer said net sales in the first-quarter ending on May 2 climbed 21.6% to $868.1 million from a year ago period.

Comparable same store sales in the quarter surged 11.4%.

Net income in the quarter soared 33.8% to $66.9 million or $1.04 per diluted share compared to $50 million or 77 cents from the same quarter last year.

European Markets

European market indexes lacked direction as investors awaited the latest in Greek debt talks amid conflicting statements from parties involved.

In London trading, FTSE 100 index fell 0.2% or 16.26 to 7,024.49 and in Frankfurt the DAX index dropped 1.8% or 212.72 to 11,465.02.

In Paris, CAC 40 index declined 1.5% or 77.27 to 5,057.49.

For the week, FTSE 100 index gained 0.9% and in Frankfurt the DAX index rose 0.2%.

In Paris, CAC 40 index slumped 1.9%.

For the month of April, FTSE 100 index jumped 1.1% and in Frankfurt the DAX index increased 0.3%.

In Paris, CAC 40 index edged up 0.1%.

Eni SpA fell 0.2% to €16.54 after the Italy-based oil and gas producer announced it will buy back €515 million of a Galp Energia exchangeable bond due in 2015 exchangeable into fully paid ordinary shares of Galp Energia SGPS, S.A. valued €1 a share.

FirstGroup Plc increased 0.5% to 114.20 pence after the U.K.-based transport company said that its bus division today ordered 385 new vehicles worth about £77.7 million.

Asian Markets

Nikkei index rewrites 15-year high for the eleventh day in a row and the yen edged lower as foreign investors increase exposure to Japanese stocks. Domestic auto demand in April declined 7.5%. Yahoo Japan soared 11% on its e-commerce plan in China with Alibaba.

Nikkei index extended rally to the eleventh day after stocks edged slightly higher and domestic auto sales declined in April.

Production volume in April declined 7.5% to 713,155 units compared to 770,591 units in the same month a year ago, the Japan Automobile Manufactures Association said today.

Domestic automobile demand plunged 7.5% to 319,482 units from a year ago month.

Total export in April increased 1.1% to 379,907 units but exports to Latin America surged 25.3%.

In April, production in passenger cars slumped 9.2% to 592,244 units but total trucks production jumped 1.1% to 108,825 units from a year ago month.

Domestic sales in passenger cars in the month plunged 10.1% to 263,376 units and total trucks sales slipped 6.6% to 55,168 units from a year ago month.

Motorcycle production in April tumbled 12% to 35,912 units while export plummeted 14% from a year ago month.

The seasonally adjusted unemployment rate in April dropped 3.3% edged down from 3.4% in the previous month and the number of unemployed people in April jumped to 2.34 million from 2.28 million in March, the Ministry of Communications and Internal Affairs said.

The Nikkei 225 Stock Average rose 11.69 to 20,563.15 and the broader Topix index edged up 0.89 to 1,673.65.

For the week, Nikkei 225 jumped 1.5% and for the month climbed 2.6%.

The yen closed at 123.92 against a dollar, a low not seen since July 2007.

Yahoo Japan Corporation surged 11.6% to 556 yen after the internet search services provider said its plans to team with Alibaba Group and enter China''s e-commerce market.

Stocks in Mumbai traded higher of economic growth data and interest rate decision from the Reserve Bank of India. RBI is expected to cut rates by 25 basis points on Tuesday.

Investors bid up stocks after the Central Statistics Office said economic growth in the March quarter accelerated to 7.3% from the revised 6.6% increase in the previous quarter.

In the previous estimate, the economy in the fourth-quarter was estimated to expand at 7.5%.

Rupee weakened 7 paisa to 63.87 against one U.S. dollar.

The Sensex Index jumped 321.73 or 1.2% to close at 27,828.44. The CNX Nifty increased 114.65 or 1.4% to 8,433.65.

For the week, Sensex Index fell 0.5% and for the month of May climbed 2.2%.

CNX Nifty eased 0.3% in the week and soared 2.3% in May.

Coal India Limited increased 2.1% to ₹391.25 after the largest coal miner said net in the fourth-quarter decreased 4.4% to ₹4,238.55 crore.

Net revenues in the quarter increased 2.9% to ₹23,067.05 crore.

Oil and Natural Gas Corporation Ltd fell 1.3% to ₹323.45 after the central government controlled oil and gas explorer said net in the fourth-quarter declined 19.5% to ₹3,935.07 crore.

Total revenues in the quarter rose 3.1% to ₹23,381.07 crore.