Dow Snaps Win Streak on Mixed Econ Data, While Barnes & Noble Inc Tanks

Good morning, good lookin'... The three things you need to know on April 4th are:

Apr 4, 2014 at 6:00AM

Thursday, investors sold just enough to sink the Dow Jones Industrial Average (DJINDICES:^DJI) a fraction of a point, snapping a solid four-day winning streak.

1. U.S. trade deficit widens in February (the Olympics didn't help)
Trading can be tough. The Commerce Department reported Thursday in its highly anticipated monthly evaluation that the U.S. trade deficit (simply the amount of goods we import vs. export) surprisingly widened to $42.3 billion in February, up from $39.3 billion in January. To make matters more awkward, analysts had been expecting the deficit to narrow.

Wake up, it's ECON 101. International trade is one factor in measuring the economy's mightiness. Buying things from abroad means we're just being lazy, but making stuff here, and shipping it to other countries is what it's all about. The total deficit of $42 billion is straight up subtracted from the rest of our economic output in order to calculate our Gross Domestic Product. Falling demand abroad for "Made in the USA" stuff hurt exports, and is bad news for the economy. 

Interestingly, we can blame rising imports on the Olympics (and not because the U.S. men's hockey team didn't crush Canada). While imports climbed by $1 billion, there was a sizable 2.1% jump in "service" imports, which turned out to represent payments for the rights to broadcast the Winter Olympic games in Sochi. So Wall Street didn't worry too much as investors expect that blip to disappear in the March report.

2. U.S. Non-manufacturing sector grows in March
Ready for more data? Right after February's bad export report, investors got the boost they needed with a positive report for the U.S. service industry in March. The ISM report on Non-Manufacturing activity jumped from 51.6 to 53.1 in March. It made Wall Streeters feel good about that steam room/massage/FroYo lunch break they took. ("Yo bro, I'm contributing to the service sector.")

The ISM report is based on a survey of more than 400 business managers within 60 sectors -- none of which are manufacturing sectors. The rating of 53.1 means that these managers are seeing growth in business, as anything above 50 indicates expansion. The U.S. economy is about 90% non-manufacturing. More business today means more profits for shareholders of non-manufacturing companies tomorrow, so Wall Street was as relaxed as the soothing massage music from the lunch break.

3. Barnes & Noble gets hammered after major investor bails 
Liberty Media is out when it comes to owning Barnes & Noble (NYSE:BKS). The publicly traded investment company Liberty Media (NASDAQ:LMCA) announced Thursday it's selling almost all of its stake in the only big bookstore chain left. Bookworms and shareholders felt betrayed, and the stock was the loser of the day, falling 14% on the news.

In 2011, things were looking good for Barnes & Noble. After decades of running a standard and unchanged bookstore business, suddenly the company developed its own e-reader: the Nook. The Nook is a less-popular version of the Kindle. Liberty Media invested more than $200 million in Barnes & Noble thinking the company had the innovation it takes to survive, but it has struggled to gain market share vs. giants Google, Apple, and Amazon.com, which all offer similar products.

It turns out Nook < Book. Barnes & Noble has created fun Nook crannies (see what we did there?) in their retail stores, and it continues to develop new models, but the losses are in the hundreds of millions. Just as its retail book business is actually picking up this year (the stock was up 48% in 2014 going into today), the news of a major investor bailing and the performance of the Nook are hits to investor confidence. Liberty will sell nearly all of its stock and remove two of its members from Barnes & Noble's Board of Directors.

Friday:

  • The big March Jobs Report from the U.S. Department of Labor

MarketSnacks Fact of the Day: Texas has the most Chick-fil-A restaurants, with 270, while New York has only one.

As originally published on MarketSnacks.com

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Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble and Liberty Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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