What’s the Story?

by CC April 27, 2012 8:50 am • Commentary


Gross domestic product expanded at a 2.2 percent annual rate, the Commerce Department said on Friday in its advance estimate, moderating from the fourth quarter’s 3 percent rate.

While that was below economists’ expectations for a 2.5 percent pace, a surge in consumer spending took some of the sting from the report. However, growth was still stronger than analysts’ predictions early in the quarter for an expansion below 1.5 percent.

Although the details were mixed, the GDP report offered a somewhat better picture of growth compared with the fourth quarter, when inventory building accounted for nearly two thirds of the economy’s growth. In the first quarter, demand from consumers took up the slack.

Consumer spending which accounts for about 70 percent of U.S. economic activity, increased at a 2.9 percent rate – the fastest pace since the fourth quarter of 2010. That compared to a 2.1 percent rise in the fourth quarter.

There were some signs of underlying strength, with even home construction rising at its fastest pace since the second quarter of 2010, thanks to the unusually warm winter.

But business spending fell for the first time since the fourth quarter of 2009, with investment in equipment and software rising at its slowest pace since the recession ended.

Business spending fell at a 2.1 percent pace after rising 5.2 percent in the fourth quarter.


Spain’s sickly economy faces a “crisis of huge proportions”, a minister said on Friday, as unemployment hit its highest level in two decades and Standard and Poor’s weighed in with a two-notch downgrade of the government’s debt.

Spain’s unemployment rate shot up to 24 percent in the first quarter, the highest level since the early 1990s and one of the worst jobless figures in the world. Retail sales slumped for the twenty-first consecutive month.

“The figures are terrible for everyone and terrible for the government … Spain is in a crisis of huge proportions,” Foreign Minister Jose Manuel Garcia-Margallo said in a radio interview.

Standard and Poor’s cited risks of an increase in bad loans at Spanish banks and called on Europe to take action to encourage growth.

Bank shares dropped 3.38 percent and Spain’s country risk, as measured by the spread on yields between Spanish and German benchmark government bonds, spiked by 10 basis points to 434 basis points.

Spain has slipped into its second recession in three years putting it back in the centre of the euro zone debt crisis storm.


Proctor & Gamble [PG  66.87    -0.02  (-0.03%)   ] The household products maker cut its earnings expectations for the year, sending shares lower in pre-market trading.

Ford [F  11.87    0.14  (+1.19%)   ] – The American automaker reported earnings that fell compared to the same period last year, but still topped estimates, pushing shares higher in pre-market trading.

Merck [MRK  38.47    0.04  (+0.1%)   ] – The pharmaceutical giant announced a big increase in quarterly earnings, despite lower-than-expected sales.

Amazon.com [AMZN  195.99    1.57  (+0.81%)   ] – At least 11 brokerages boosted their price target on the online retailer a day after the company reported earnings that blew past Wall Street’s expectations. Shares surged in pre-market trading.

Expedia [EXPE  32.63    0.31  (+0.96%)   ] – The online travel agency beat earnings growth estimates, thanks to an increase in its international hotel revenue. In addition, at least five brokerages lifted their price target on the firm, sending shares sharply higher in pre-market trading.

Zynga [ZNGA  9.42    0.31  (+3.4%)   ] – The social network game developer rose in pre-market trading after it reported quarterly earnings and revenue that beat Wall Street’s expectations, but analysts seemed to be unimpressed, with at least four brokerages slashing its price target on the firm.

Aetna [AET  45.31    -4.05  (-8.2%)   ] – The company edged higher in pre-market trading after Bernstein said the health insurer’s recent pullback creates a buying opportunity. The company posted earnings in the previous session that missed earnings estimates.