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For the third straight day, the Dow Jones Industrial Average (DJINDICES: ^DJI ) scored big, rising 162 points Wednesday on some good-lookin' Chinese econ data and Federal Reserve headlines.
1. China's economy slows to 7.4% GDP growth
Chinese economic data is a little more sour than sweet right now. China's economic growth, as measured by gross domestic product, all the services and goods (often poorly made and occasional poisonous) made beyond the Great Wall, fell to 7.4% in the first quarter of 2014. That's just below the 7.5% Chinese officials are targeting for the full year, but above the 7.3% that U.S. economists were expecting.
Keep in mind that unlike a fortune cookie's surprise, China's economic slowdown isn't entirely unexpected -- it's been slowing slightly over the past couple of years. The command-style government has been instituting multiple reforms as its once-booming real estate sector eases down and exports have begun showing weakness.
The takeaway is that as the world's second largest economy and key trade partner for most products you use (including whatever you're reading MarketSnacks on right now, most likely) is a solid barometer of global economic health. China's economy has been humming along for decades (by comparison, U.S. economic growth has been between 1%-3% the past few years), so we assume the 7.4% GDP would still make General Tso proud.
2. After climbing 11%, Twitter drops 2%
On Tuesday, Twitter (NYSE: TWTR ) bought Gnip, a company that sells raw Twitter data to companies. Want to know what people are tweeting about your brand? Gnip tells you (for a price). Selling data to companies is just a small part of Twitter's strategy (about 7% of revenues in 2013), but Wall Street "favorited" the news and bid up the stock 11%. It was the biggest single-day jump since Twitter went public.
Twitter also hired a Google exec, Dan Graf, who's the master of the Google Maps App. Nobody knows what Twitter's new consumer product head will do, but the big hire/big acquisition combined to blow up the stock price to $45 Tuesday.
Why's the stock down 2.4% Wednesday? One reason could be the big test coming up for the stock. Twitter's half-birthday (its IPO was in November) is on May 6, which is when the "lockup" period ends. It's Twitter stock's D-Day -- for the first time the major original investors that own over 50% of the stock can sell their shares.
It's totally customary for new IPO stocks to have a six-month lockup period. What's uncommon is that the two co-owners and many other big shareholders pledged not to sell any shares when the lockup ends. Twitter is their baby, and they're not going to sell out on it. Still, investors are queasy about that day. Owners with 46.6% of the shares have promised not to sell, but a tweet is not a firm promise, so some big chunks of stock could get dumped onto the market and kill the stock price.
3. Weak mobile ad pricing hurts Google's earnings
Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) announced $3.5 billion profits for the first three months of 2014, missing Wall Street estimates. Earnings climbed 3% and overall revenue was up 19% from last year, but the stock is down over 3% since the disturbing news of lower ad prices.
More mobile Internet use means less money ad money for Google. It's tougher to shop on your iPhone than on a desktop, so advertisers won't pay as much to Google for mobile ads. Consumers' migration to mobile is hurting Google just as it was hurting Facebook last year.
But Facebook seems to be figuring mobile out, and Google promises it will, too. The number of "paid clicks" grew 26% year over year, but "cost per click" fell 9%. Google's stock climbed 40%, but Wednesday's flat earnings report definitely made Google founders Sergey Brin and Larry Page want to switch their Gchat status to "invisible."
4. Fed's Beige Book describes winter's economic punch
It's not a pretty shade, but the Federal Reserve's "Beige Book" has some serious color on the state of the economy. The report is published eight times each year, and according to the April version released Wednesday, both consumer spending and overall economic growth improved across each of the central bank's 12 districts -- but the theme of "the book" was Mother Nature.
The takeaway is that the report highlighted how badly winter affected the U.S. economy, and it wasn't until March that Uncle Sam started to rebound. Maybe the Fed writers don't have access to a thesaurus, because the word "weather" was referenced 103 times -- the brutal cold and blizzards across much of the country discouraged consumers from hitting retail stores, kept potential home-buyers indoors instead of at open houses, and slowed the pace of manufacturing and deliveries. #NotSoHot.
- Weekly jobless claims
- First-quarter earnings reports: Goldman Sachs, Chipotle Mexican Grill, BlackRock, General Electric, PepsiCo
As originally published on MarketSnacks.com
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