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Here's a breakdown of the latest news, along with one stock that's soaring today.
- 3Q GDP beats as "consumption" increases- The initial estimate for third-quarter U.S. gross domestic product (GDP) surprisingly came in at 2%, ahead of expectations for a 1.8% increase. At first glance this is a positive sign for an economy that only grew 1.25% in the previous three months – but the details of the report point otherwise. Over one-third of the 2% increase, 0.71%, came from government consumption, of which 0.64% came from defense spending. While personal consumption contributed 1.42% to GDP growth, it only grew 2% from the previous quarter, below expectations of 2.1%. "You're getting a mix of data that don't have a clear direction," Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion, told Bloomberg News. "It's important for investors' psychology to see GDP data beating estimates. Yet the earnings season has been a very challenging one." It appears that the increase in government spending, which was the biggest rise in three years, was led by defense maintenance costs. This is the last GDP estimate before the election and U.S. President Barack Obama will surely try to promote this as overall economic growth, even though it is far from it.
The unexpected GDP number is somewhat distracting investors from another disappointing earnings report.
- Apple's earnings miss again- Apple reported its fourth-quarter earnings yesterday. While it sold more iPhones than expected, it missed analysts' estimates for earnings and lowered its 2013 fiscal first-quarter outlook. The Cupertino, CA-based company announced quarterly revenue of $36 billion, 27% higher than a year ago and in-line with projections. Yet, its earnings of $8.2 billion or $8.67 a share was below forecasts and the company now sees first-quarter EPS of $11.75 compared to previous estimates of $15.49. Analysts are mixed on whether Apple's stock has reached its peak or if now is the time to get it on the cheap. "The investment community tends to get wrapped around the axle on tertiary details and fails to forget the big picture," Brian Marshall, a technology analyst at ISI Group told Reuters. "Demand for Apple products is much greater than current supply." Yet others disagree, saying that Apple's outlook and lower margins do not bode well for future growth. "The iPhone 5, iPod Touch, iPod Nano, iPad mini and iMac all feature new form factors and our checks with the supply chain indicate that many of these are very complex to manufacture and are likely resulting in reduced production efficiencies," Nomura analysts said in a note as they lowered their price target to $660 from $710. Apple stock is down 1% in early trading, hovering just above $600.
While yet another industry leader takes an earnings hit, here's one company that's up 47% for the year and is soaring today on strong earnings.
- Taser International Inc. (Nasdaq: TASR) beat earnings and revenue sending its stock up almost 20% today. Taser does indeed produce tasers and other electronic control devices used in the military, law enforcement, personal defense and private security. The company earned seven cents per share during the third-quarter, beating the average estimate of three cents. On October 10, analysts at JPMorgan Chase reiterated an "overweight" rating on Taser stock and year-to-date TASR is up almost 50%. Its one-year price target is
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