US stocks tumbled along with other big global markets as the dollar fell after data on US economic growth came in worse than expected and the Fed said the economic slowdown reflected “transitory” factors.
First, the scoreboard:
- Dow: 18,041.97, -68.17, (-0.38%)
- S&P 500: 2,107.64, -7.12, (-0.34%)
- Nasdaq: 5,030.65, -24.78, (-0.49%)
And now, the top stories on Wednesday:
- US Gross Domestic Product expanded by just 0.2% in the first quarter, missing the expectation for 1% growth. The Bureau of Economic Analysis noted that the slowdown in exports (partly due to the West Coast port strike), business spending and government spending caused the slowdown. In a note after the release, Paul Ashworth at Capital Economics wrote: “The 0.2% annualized gain will raise fears that the recovery is somehow coming off the rails but, just like last year, we anticipate a marked acceleration in growth over the remaining three quarters of this year.”
- The Federal Reserve thinks the economic slowdown is temporary and reflects “transitory factors,” including the strong dollar and low oil prices. The Federal Open Market Committee ended its two-day meeting Wednesday, and left interest rates unchanged as expected. Their assessment of the economy also noted: “A range of labour market indicators suggests that underutilization of labour resources was little changed. Growth in household spending declined; households’ real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high.”
- Germany’s ten-year bund yield doubled to around 0.28% in nearly two hours. Bloomberg pointed to comments from bond market gurus Jeff Gundlach and Bill Gross suggesting they’re shorting the bund. In other markets, the FTSEurofirst 300 Index, which measures Europe’s 300 largest companies by market cap, also sold off, falling by over 2%. The MSCI’s all-country world equity index also closed lower.
- West Texas Intermediate crude oil rallied by more than 3% to around $US59.33, a year-to-date high. The Energy Information Administration’s weekly release showed that commercial crude inventories rose by 1.9 million barrels last week, less than expected, and lower than the build of 3.3 million barrels the previous week.
- Salesforce, a cloud computing company worth $US46 billion, has hired financial advisers to fight off takeover offers, according to a Bloomberg report. It’s unclear who’s making the offer. If the deal goes through, Salesforce would be the largest software company ever acquired. Its shares spiked by up to 17% on the news to a lifetime high of around $US78.36 a piece.
- Shares of Buffalo Wild Wings fell by up to 14.8% on Wednesday, after the company reported first quarter revenue and comparable store sales below analyst expectations on Tuesday. Revenue jumped 19.8% to $US440.6 million (vs $US452.7 million estimated); comparable store sales climbed 7%, (8.6% expected.) During the earnings call Tuesday, the company disclosed that only a few of its stores will screen the fight between Floyd Mayweather and Manny Pacquiao this Saturday because of the cost.
- Lumber Liquidators shares tumbled by more than 16% in early trading after the company reported a big Q1 earnings miss. Legal expenses were a big drag on the company’s results; it said 103 lawsuits have been filed since CBS’ “60 Minutes” investigation into its China-sourced formaldehyde flooring aired March 1. The company also said the Justice Department is seeking criminal charges against it under the Lacey Act, related to its imported products.
- In economic data, pending home sales rose by 1.1% month-over-month (versus 1% expected), and 11.1% year-over-year (versus 5.1% expected.) “Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year,” Lawrence Yun at the National Association of Realtors noted.
- Former Fed chair Ben Bernanke has joined PIMCO as a senior advisor. In an announcement, PIMCO said Bernanke, “will contribute economic expertise to [the] firm’s investment process” and will “engage with clients.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.