Markets were headed much higher on Friday after fourth-quarter growth was cut to 2.4%. The Commerce Department reported that consumer spending was lower than originally expected as well as exports. This was down drastically from the third-quarter’s 4.1% rate and the original 3.2% estimated for the fourth-quarter. Economists were predicting growth to drop to a 2.5% rate. A large portion of the GDP is consumer spending, which was hit by the weaker-than-expected retail sales were revised for November and December. Consumer spending was down to a 2.6% rate, while it was previously reported at a 3.3% rate. Ryan Sweet, a senior economist at Moody’s Analytics, said, “I don’t think the fundamentals have changed appreciably. Heading into this year we knew it wasn’t going to be smooth sailing.” The forecast for the first-quarter of 2014 is expected to ring in under 2%.
The National Association of Realtors announced that pending home sales were up in January. Pending sales were up 0.1% to a total of 95.0 for the first month of 2014. This news followed a disappointing hit to sales at the at the end of last year, which was partially attributed to the inclement weather that swept across the United States. December’s numbers were down 5.8% and it took the index to its lowest levels since November 2011. Lawrence Yun, chief economist for the National Association of Realtors said, “Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping. Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favorable as it was a year ago.”
Shares of Citigroup were up slightly after the company reported fraud at their Mexico unit which will cause lower results for 2013. The company said that their net income will drop by roughly $235 million due to writing down loans. This will bring down their previously reported $13.91 billion income lower. The bad loans were said to have been made to Oceanografia SA de CV, a Mexican oil services company that is a contractor for Pemex, the nation’s state-owned oil company. Oceanografia is currently in the middle of corruption scandal in Mexico. Citigroup said that their employees at the subsidiary may have been aware of the crime. Citigroup’s Chief Executive Michael Corbat, said, “I can assure you there will be accountability for those who perpetrated this despicable crime and any employee who enabled it, either through lax supervision, circumvention of our controls or violating our Code of Conduct.”
That’s all for the day.
All the best,