Dow and S&P 500 Drop While Twitter Soars on Debut

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After hitting record highs yesterday, the Dow Jones Industrial Average (^DJI -0.11%) and S&P 500 (^GSPC 0.02%) are down after U.S. economic growth came in higher than expected. Better economic results are seen as bad for the market, as the Federal Reserve is then more likely to taper its $85 billion monthly asset purchases. Not everything is down: Twitter (TWTR) surged up as much as 92% on its first day of trading before coming down slightly. As of 2 p.m. EST, Twitter is up 80.5% to $46.94, while the Dow is down 107 points, or 0.68%, and the S&P 500 has lost 18 points, or 1.01%.

Many market observers were worried about a repeat of the Facebook (META -0.52%) IPO debacle, when technology problems on NASDAQ screwed up trading throughout the day. The Facebook fiasco was one of the reasons Twitter chose to go public on the New York Stock Exchange instead of the NASDAQ, which is the normal venue for tech stocks. The NYSE repeatedly tested its systems to ensure they wouldn't break. There have been no problems this morning, and Twitter remains up 75%.

Separately, there was a market failure today, but most people won't notice it. The over-the-counter (OTC) market has been halted by FINRA "due to a lack of current price transparency information" -- i.e., technical problems. With today's Twitter IPO, perhaps there was an error from the infamous Tweeter mix-up.

While the Twitter IPO has gone off without a hitch so far, at 75 times revenue, I will be passing on this one. You can get Facebook for 17 times revenue, and even that's too rich for my blood.

The U.S. Economy
There were two U.S. economic releases today.

The one to pay attention to is the advance estimate of third-quarter gross domestic product. GDP rose at a 2.8% annual rate in the third quarter, beating the second quarter's 2.5% and economist expectations of a drop to 2%.

The Dow and S&P 500 sold off on the news, as the stronger-than-expected growth means the Federal Reserve is more likely to taper its asset purchases. The Federal Reserve has been buying $85 billion of long-term assets each month -- $40 billion in agency mortgage-backed securities and $45 billion of long-term Treasuries. While asset purchases may be tapered in the next six months, the Federal Reserve is likely to keep interest rates at rock bottom for quite some time. The markets expect the Fed to hold rates low until late next year or 2015, but new studies from members of the Fed suggest that low rates could stay until 2017.