U.S. Econ News Boosts Dow to First Record High of 2014

The four things you need to know on May 1.

Apr 30, 2014 at 11:00PM

Wednesday on Wall Street reminded us of an all-you-can-eat Denny's breakfast buffet -- packed with a whole bunch of market-moving data, meetings, and earnings reports for hungry investors to choose from. Plus there was a sweet dessert -- the Dow Jones Industrial Average (DJINDICES:^DJI) popped 45 points to reach 16,581 points, its first record close of 2014.

1. U.S. GDP barely grows in first quarter
The first reading is in for the first-quarter GDP growth of the U.S. economy -- up 0.1%. If that number looks pathetic, it's because it is (economists were expecting 1.1% growth). Economic weakness abroad hurt our export business, and domestic frozen-ness this winter killed investment here at home.

It's the second worst quarterly growth since the recovery began five years ago, which was the biggest weakness. Investors took some solace in the fact that consumer spending, which is the heart and soul of the U.S. economy, grew at a solid 3% rate. 

Remember: Gross domestic product is the broadest way to look at an economy. It adds up all economic activity (buying and selling of stuff) and gives you one big number. The US GDP was $16.8 trillion last year, and we need 3% growth or more annually to make a real dent in the unemployment rate, lift wages, and support the middle class. These are the Holy Trinity of economics and have big effects on companies' profits and on the stock markets.

The takeaway is that the economy grew at a 3.4% pace the second half of last year, so 0.1% growth last quarter is a cold slap in the face. The U.S. was like the Siberian tundra in January and February. No wonder the Soviet economy had it tough.

2. ADP predicts big 220K job gain for April
The number 222,000 is more than jut a nice, round figure with a pleasant balance of zeros and twos. It's also the number of jobs that payroll-tracking firm ADP is projecting the U.S. added in April. That figure beat general expectations, and it's a solid improvement from the 192,000 jobs the U.S. actually added in March, showing that the economy shook off the winter ice to gain some momentum for the spring.

The takeaway is that before you pop open those celebratory PBRs, remember that the ADP job report is helpful, but it ain't the real deal. Investors look to the ADP number as just a preview for the official monthly jobs report, which for April the Labor Department will release at 8:30 a.m. ET this Friday. Looks like expectations will be kind of high.

3. Fed cuts stimulus further after two-day policy meeting
"It's just a snip" isn't the kind of thing you want to hear from either your doctor or the Federal Reserve. But that's just what was decided at Wednesday's finish of the two-day, eight-times per year, policy-setting meeting of the heads of the nation's central bank. The Fed's cutting its monthly stimulus support by a cool $10 billion.

Need some background? To give the U.S. economy its mojo back, the Fed's been instituting its third round of "quantitative easing" (aka "QE3"), a policy in which it buys billions of long-term bonds monthly, which keeps interest rates low -- and low interest rates encourage folks to borrow money, and spend that cash on economy-boosting splurges, like new homes or absurd products from SkyMall magazines.

So why didn't Wall Street freak out that its beloved stim was slowing? As QE3 has slowly been reduced from $85 billion in bond purchases to $55 billion, and now $45 billion, over the past few months, they've frustratingly sold down stocks in response. But this time around, the stim cut was widely expected, so the response was more like a nonchalant, obnoxious shrug from investors instead.

4. eBay drops after poor outlook and huge tax bill
The first ever online auction company, eBay (NASDAQ:EBAY), had earnings headlines that looked great -- revenues grew 14% to $4.2 billion. That's what eBay wanted you to focus on. But like finding an appealing iPhone 5S on eBay for a couple of hundred bucks, it helps to read the fine print. Net income dropped from $677 million last year to a loss of over $2 billion. 

It's was a $3 billion tax bill that caused the ridiculous loss. eBay decided last quarter to bring its cash home from overseas -- cash that was generated last year but stayed in Europe's glorious tax havens to avoid ugly tax payments. Well, shareholders want that money (and they're tired of making Europe look good), so eBay finally had to pay the back taxes on those profits generated abroad. There was a monster $9 billion cash hoard brought home, but a $3 billion tax bill came with it and erased the net earnings for the quarter.

Adjusted profits were $899 million, up 8% from last year. Companies create the adjusted numbers so that your mind isn't blown away by huge one-time events that have nothing to do with the normal business (like a $3 billion tax payment). Investors still sold eBay like a prematurely made Broncos Super Bowl champs T-shirt -- it was down 5% Wednesday, as its forward earnings projections were disappointing.


  • Motor-vehicle sales
  • Fed Chairwoman Janet Yellen speaks
  • ISM manufacturing index
  • First-quarter earnings reports: Expedia, ExxonMobil, MasterCard

MarketSnacks Fact of the Day: About 58% of the world's fish stocks have now collapsed or are over-exploited.

As originally published on MarketSnacks.com

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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