BOJ Surprises, GDP Misses, and Markets Reacts Negatively

04/28/2016 11:10 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

The market is reacting negatively to a surprise decision from the Bank of Japan, lower than anticipated GDP data, and a flurry of earnings announcements, says Michael Berger, Associate Editor of MoneyShow.com, who highlights the developments announced this morning.

The market has come off of its lows as traders digest a mountain of economic data and earnings reports this morning. The Dow Jones industrial average briefly fell more than 100 points soon after the market opened and the index has been able to trim its losses.

The market was poised to open sharply lower after the Bank of Japan's (BOJ) announced that it will keep monetary policy steady.

The BOJ did not shut the door on additional easing steps and the central bank said it will provide loans at zero interest rates to areas impacted by the recent Kyushu earthquakes.

Yen Strengthens Against Global Currencies 

The decision by Japan’s central bank sent global markets lower as it disappointed a section of the market who were betting on further stimulus. Japan's Nikkei 225 Index ended the trading session down 3.61% .

The announcement strengthened the yen against other currencies and it also caused the shares of Japanese exporters to decline as a stronger yen is usually a negative for exporters.

The reason why a stronger yen is bad for exporters is because it reduces their overseas profits when converted into local currency.

First Quarter GDP Misses Expectations

The Labor Department released first quarter gross domestic product (GDP) estimates and the economy expanded at the slowest pace in two years. This is the first of three estimates for the quarter before annual revisions in July.

According the report, GDP increased by 0.5% and this came in below economists’ expectations of 0.7%. Economists’ projections for GDP ranged from gains of 0.1% to 1.5%.

Almost all sectors of the economy weakened in the first quarter, with the exception of the housing market which was the only bright spot in the report.

Jobless Claims Beat Expectations

Jobless claims last week hovered around four-decade lows, showing the labor market remains the strongest part of the U.S. economy.

Initial applications for unemployment benefits climbed by 9,000 to 257,000. The prior week’s revised claims were the fewest since 1973.

The median forecast of 50 economists surveyed by Bloomberg called for claims to rise to 259,000.

Earnings Season Heats Up

A number of industry leaders reported earnings this morning and several companies reported results that came in much higher than expectations.

Companies that are announcing earnings after the close include: Amazon (AMZN), LinkedIn (LNKD), Baidu (BIDU), Microsemi (MSCC), Merit Medical Systems (MMSI), Groupon (GRPN), and Cubesmart (CUBE).

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