Twitter Stocks About to Make Debut - Economic Highlights
On this side of the pond, Twitter ( TWTR ) mania has overtaken everything else today, including the U.S. GDP report. The excitement for Twitter and the overall momentum in the IPO market is part of the all-around favorable sentiment that has pushed stocks into record territory. The performance of social-media stocks like Facebook ( FB ), linkedIn ( LNKD ) and Yelp ( YELP ) has been even more eye-popping. The hefty valuation multiples with which the Twitter IPO has been priced reflect the hopes of many that the stock will soon be joining the social-media party. But irrespective of how the stock eventually does, there is no doubt that the company's backers and bankers chose an excellent time for taking it public.
In more mundane matters, the first read on Q3 GDP came in better than expected, with the economy growing at +2.8% pace instead of the +2% consensus estimate and the final +2.5% growth pace in Q2.
The 'headline' positive surprise notwithstanding, the report's
internals aren't that exciting, with personal consumption
expenditures or consumer spending increasing at +1.5%, lower than
Q2's +1.8% growth pace. Inventories and net exports were bigger
contributors to growth compared to Q2, while non-residential fixed
investments grew at a lower (+1.6%) pace than was the case in Q2
(+4.7%). Residential investments increased at a healthy +14.6% pace
in Q3, modestly accelerating from Q2's +14.2% pace. Government
spending was modestly better relative to Q2, with federal
government outlays declining at a roughly equivalent pace to Q2 and
state & local governments doing better.
Estimates for GDP growth in Q4 have come down, reflecting the transitory effects of government shutdown at the start of the period. But many are hoping that the GDP growth pace ramps up to +3% and higher next year. This growth outlook underpins the 'Taper' talk. As long as the economy is moving in that direction, which it is at present, then we should expect the Fed to move towards pulling back on the QE program.
The announcement may not come in the December meeting, but there is little doubt that the Fed is itching to get out of the QE business as soon as possible. But let's not dwell on boring matters like Taper and QE and join the Twitter party, at least for today .
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