US GDP at 2 Percent, Stock Markets Mixed

Stocks in the United States ended the week flat on Friday. After slight drops during the day, bargain hunters stepped in to buy up shares of stocks like Apple. For most of the week, however, many stocks posted weak results as multi-national companies in the United States reported lower-than-expected third quarter revenue.

Apple shares posted some of the most fluctuations during the day. It hit a session low before it advanced enough to end the day 0.9 percent higher. Apple shares currently fetch $604 each. As the world’s largest privately traded company, many people expected the technological company to outlast the revenue woes that were troubling other multinationals. Instead, Apple had lower-than-expected iPad sales, weaker quarterly earnings and a lower margin outlook. At its lowest during the session, Apple shares touched $591.

The PHLX semiconductor index managed to gain 0.5 percent over the day. After losses last week, companies like Intel managed to advance by the end of the week. On Friday’s session alone, Intel rose 1.2 percent to $21.95. During the previous week, Intel had released data about revenue and net earnings that did not meet forecasts.

United States Economy Up

Last week, the United States Commerce Department released their GDP growth for the third-quarter. After expectations of a 1.3 to 1.7 percent growth rate, investors were surprised by the actual 2 percent growth rate. Unfortunately, this number is still lower than what is required for a speedy recovery. It does point to long-term growth and shows signs that the economy is improving overall. Unfortunately, the growth in GDP has not included company’s revenue. Overall, only 36.9 percent of S&P 500 businesses have had revenue numbers that beat the forecast. Surprisingly, 62.5 of companies managed to outperform earnings expectations.

The Dow Jones Industrial average rose 3.53 points on Friday. It closed 0.03 percent higher at 13,107.21. The Nasdaq Composite Index advanced a minimal 0.06 percent or 1.83 points to finish at 2,987.95. Unlike the Dow Jones and the Nasdaq Composite, the Standard & Poor’s 500 Index dropped 1.03 points or 0.07 percent to end the day at 1,411.93.
Overall, the Nasdaq Composite Index fell 0.6 percent while the Dow Jones Industrial Average dropped 1.8 percent. The Standard & Poor’s 500 index also retreated 1.5 percent.

One of the top winners for the day was Amazon Incorporated. This company managed to rise 6.9 percent to reach a level of $238.24. Amazon has spent more money this year on increasing their efficiency, marketing and long-term capabilities. Most analysts believe that these measures will temporarily hurt margins, but will increase profits over the long-term.

Hurricanes and Elections

Investors are waiting for the United States presidential election on November 6. Depending on the outcome this race, the markets could be in for huge fluctuations by the end of the year. Outside of the United States, some investors are concerned over the outcome for the United States Federal Reserve Bank. If Governor Mitt Romney is elected, he is expected to elect a new head for the Fed when Ben Bernanke’s tenure ends in 2014. This change in leadership would threaten the quantitative easing policy currently in place and could spook away some international investors.

The outcome of regional and national elections will also determine the United States ability to deal with its ongoing deficit reduction problem. Starting next year, tax increases and spending cuts will start eating up an estimated 4 percent of GDP in the US. Termed, “the fiscal cliff”, this eventuality is viewed by economists as something to be avoided. The people elected to the presidency and Congress will have to negotiate an agreement to avoid the fiscal cliff. If congress and the presidency are split between two parties, it will prove difficult for the United States government to resolve the fiscal cliff in time.

Currently, the New York Stock Exchange is planning on opening for business as usual. Hurricane Sandy is expected to make landfall on the East Coast of the United States. By Friday afternoon, Hurricane Sandy had already killed 41 people in the Caribbean. It will potentially make landfall in New York. The stock market is expected to keep running and has backup power generators in place in case of strong winds. Any critical traders or staff on hand will have accommodation arranged for them. The Nasdaq also stated that they had put plans in place to ensure that everything was ready for the storm.

Since Thursday, ten-year Treasury notes dropped to 1.78 percent. Yields were previously at 1.82 percent on Thursday.

Changes During the Day

Varian Systems gained 15 percent on Friday, or $8.83, to end at $66.93. This was the largest increase of any company on the Standard & Poor’s 500 index. This company reported a 20 percent increase in their income because of higher sales of their products. Among other things, Varian Medical Systems sells a range of radiation-emitting devices and medical imaging equipment.

Comcast also gained 3.3 percent during the day. It rose by $1.20 to reach $37.56. In the third-quarter, Comcast’s income more than doubled. This unexpected increase was led by customers signing up for add-on services like high-definition and video recorder options.

The advertising company, Interpublic, reported lower-than-expected results for the third-quarter. Shares of Interpublic dropped by 2.5 percent or 26 cents. It currently stands at $10.29.

WhiteWave Foods released its initial public offering on Friday at a price of $18. In the first few hours of trading, the dairy company rose to $19.17 before it dropped by more than two dollars. It ended the day 25 cents lower than its IPO price at a rate of $16.75.

Tokyo Stock Exchange Drops

The Japanese Nikkei Stock Average fell by 122.14 points of 1.35 percent on Friday. It closed at a session low of 8,933.06.  On the day prior, the Nikkei had climbed 100.9 points. TOPIX index of First Section issues fell by 10.19 points to finish at 741.23 or 1.36 percent lower. Much of the drop in Japan’s stock market is due to the Bank of Japan monetary policy meeting next week. Many analysts believe that the BOJ may elect to adopt new fiscal easing measures.

About the Author
Marcus Holland is editor of the websites and He holds an Honors degree in Business and Finance and regularly contributes to various financial websites.

Leave a Reply