The stock markets in The United States declined as investors struggle to deal with several economic data such as mixed earning results, lower forecast on oil prices, and the weaker-than-expected gross domestic product (GDP) growth.
Today, the Department of Commerce reported that the U.S GDP grew 2.6% in the fourth quarter, significantly lower than the 5% growth in the previous quarter. Economist estimated an expansion of 3.2%.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
The data came after the Federal Reserve released its assessment that the U.S. economy is growing at a “solid pace.” Policy makers reiterated their position that they will remain patient when it comes to the timing of increasing interest rates, as they need to see further signs of stable economic growth.
Phil Orland, chief equity strategist at Federated Investors commented that weak GDP prompted investors to sell stocks and invest in bonds. He thinks the GDP number will be revised upwards.
In the Monthly Investment Outlook of Janus Capital for January, Bill Gross emphasized that the near-zero interest rates lead to low to no economic growth citing the reason that “the markets and the financial sector are ultimately the servants of the real economy.” He warned that if the deflationary conditions persist too long, the capitalist economic system will eventually collapse.
The current GDP data is only an advance estimate. The Department of Commerce will release its second estimate based on more complete data on February 27.
Economist forecasted that the oil prices will continue to fall before experiencing a mild rebound in the second-half of 2015, according to survey conducted by Reuters.
ANZ analyst Mark Pervan said, “It should be a year of differing halves. The likelihood of further near-term fund selling will see Brent trade down to $42 per barrel and WTI at $40 per barrel by the end of Q1 2015.”
Almost all of the analysts who participated in the Reuter’s survey reduced their estimates for oil prices by $15 per barrel or more.
- Dow Jones Industrial Average (DJIA) – 17,166.10 (-1.44%)
- S&P 500- 1,995.04 (-1.44%)
- NASDAQ- 4,635.24 (-1.04%)
- Russell 2000- 1,167.91 (-1.87%)
- EURO STOXX 50 Price EUR- 3,351.44 (-0.60%)
- FTSE 100 Index- 6,749.40 (-0.90%)
- Deutsche Borse AG German Stock Index DAX- 10,694.32 (-0.41%)
- Nikkei 225- 17,674.39 (+0.39%)
- Hong Kong Hang Seng Index- 24,507.05 (-0.36%)
- Shanghai Shenzhen CSI 300 Index- 3,434.39 (-1.36%)
Stocks in Focus
The stock price of Amazon.com surged more than 13% to $354.53 today. The e-commerce giant disclosed its e-mail service for enterprises called Amazon WorkMail.
Biogen Idec gained more than 10% to $389.16 per share after reporting strong financial results for the fourth quarter. The company reported that its earnings increased 94% to $3.74 per share while its revenue climbed 34% to $2.6 billion during the period.
The shares of NetSuite plummeted almost 8% to $98.43 per share despite reporting solid financial results for the fourth quarter. The company posted $0.10 in earnings per share on $157.9 million revenue. Analysts expected the company to post $0.10 EPS on $155.4 million in revenue. Barclays downgraded its rating for the stock to Equal-Weight from Overweight.