By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Twitter, Garmin jump; Fed due later
NEW YORK (MarketWatch) -- The U.S. stock market pared opening
gains on Wednesday, as investors were concerned that the Federal
Reserve might start raising interest rates sooner than anticipated
following a much stronger pace of economic growth in the second
quarter.
The U.S. economy grew at an annual pace of 4% in the April-July
period while inflation surged to the highest level in three years,
prompting some in the market suggest the Fed might be behind the
curve on interest rates. Also read: Fed to react cautiously to
second-quarter GDP data
The second-quarter GDP report showed the economy "really bounced
back nicely," said Peter Cardillo, chief market economist at
Rockwell Global Capital, in a phone interview.
But Cardillo noted the GDP report also featured a higher
inflation reading, and that could be sparking worries that the Fed
statement at 2 p.m. will be hawkish, with central bankers signaling
they might raise rates sooner than expected.
Tech stocks were shining amid a buying frenzy in Twitter Inc.
(TWTR) after the social media network's results blew past analysts'
forecasts. The Nasdaq Composite (RIXF) rose 19 points, or 0.5%, to
4,463.97.
The S&P 500 (SPX) was nearly flat at 1,972.72. The Dow Jones
Industrial Average (DJI) slipped 7 points to 16,906.44.
Follow MarketWatch's live blog of today's stock-market
action.
The U.S. economy grew at a 4% annual pace in the second quarter,
expanding at the fastest pace since last fall. Inflation as
measured by the Federal Reserve's preferred price index surged in
the second quarter to the highest annual rate in three years,
potentially making the central's bank effort at managing the U.S.
recovery more difficult.
Separately, the 218,000 jobs added by the private sector in July
fell short of Wall Street expectations. Still, it was the fourth
straight month in which that part of the economy has added more
than 200,000 jobs.
Investors also remain focused on the outcome of the Federal
Reserve's meeting and the policy statement due at 2 p.m. Eastern
Time. Economists expect the central bank to reduce the monthly pace
of its bond purchases by another $10 billion to $25 billion, and to
signal that it intends to end quantitative easing in October.
Investors will be looking for any hint that the first interest-rate
hike from the Fed could come sooner than expected or that rates
could go up faster than anticipated.
Also read: This tweak from the Fed could rock the market
Twitter rules
Shares of Twitter leapt 25% as analysts moved up price targets
in the wake of blowout results. "Stronger results amid a negative
sentiment should propel the stock higher," said Cantor Fitzgerald
analyst Youssef Squali in a note to investors. He lifted his price
target to $58 from $40. Read: Can Twitter convert the
'logged-out'?
Garmin (GRMN)sharply raised its forecast for the year, with the
GPS -devices maker citing strong first-quarter results as reason
for the improved outlook. Shares gained 7.4% ahead of the bell.
Humana(HUM) shares rose nearly 2%. The health care insurer's
profit fell slightly short of expectations, but sales beat
forecasts. The company also confirmed its 2014 per-share
guidance.
Shares of Sprint (S) rose 2.4% ahead of the open after the
mobile-phone company swung to a profit in the second quarter, as
the pace of subscriber losses slowed.
Amgen(AMGN) shares rose 4.8% after the company posted a 23% rise
in earnings, and announced a 15% cut in its workforce as part of a
restructuring program late Tuesday.
DreamWorks Animation SKG Inc. shares (DWA) fell 14% after the
movie studio swung to a second-quarter loss. (Read more about the
day's notable movers here:
http://www.marketwatch.com/story/twitter-amex-yelp-among-stocks-to-watch-2014-07-29.)
Spain stocks rise, Russian blue-chip index surges
European stocks traded mostly lower, with the exception of gains
in Spanish markets, after surprising economic growth data. In Asia,
Hong Kong stocks rose for a seventh straight session.
The Russia MICEX index of blue-chips surged more than 2% on
Wednesday, which one analyst said is because the new sanctions
don't affect the country's key gas sector. Some strategists
maintain, though, that Russia stocks remain a tricky bet in wake of
those sanctions.
In other markets, crude-oil prices (CLU4) rose, gold (GCQ4) gave
up gains and fell after the strong GDP data. The dollar index
(DXY), which measures the greenback against a basket of six
currencies, traded slightly higher.
Also read: Need to know: Ditch your 'portfolio patriotism' ahead
of dog days of August
More must-reads from MarketWatch
Mark Hulbert: The hidden truth about the stock market in
August
Why this bond veteran is worried
Watch UCLA campus flood
Subscribe to WSJ: http://online.wsj.com?mod=djnwires