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Midday Market Update

Stocks Higher Despite GDP Data

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U.S. Market    
Stocks were higher for the second consecutive day, following on a strong showing in Europe, though a key reading on U.S. economic growth saw a downward revision. 

In its final estimate of first-quarter gross domestic product, the Commerce Department said U.S. GDP increased by 1.8% for the quarter, lower than the previous two estimates as well as Wall Street's prediction of growth at 2.4%, which was the previous Commerce Department reading. Although the economy has expanded, albeit slowly, for 15 quarters in a row, the average quarterly pace of 2% remains very weak. A significant factor in the final reading was a downward revision in consumer spending, particularly for services, as well as business expenditures. 

Treasuries rose following the GDP data.

Meanwhile, European Central Bank president Mario Draghi provided some certainty to the European markets by stating the ECB will continue its monetary accommodation policies for the foreseeable future and that an exit of such programs remains "distant."

The Dow, the S&P 500, and the Nasdaq were all up by 0.7% at midday. 

Stocks on the Move
 General Mills (GIS) posted a 13% year-over-year gain in fourth-quarter earnings and an 8.5% increase in revenue. Each reading exceeded Wall Street estimates, though the gross margin narrowed by more than 2 percentage points. The company saw weakness in its cereal and yogurt segments for the fiscal year but is optimistic that advertising campaigns will help bring sales for those segments back to positive territory for the new fiscal year.  Morningstar analysts say General Mills continues to benefit from a strong brand portfolio and an extensive global distribution platform. Shares were down by 0.6% at midday. 

 Monsanto (MON) reported that earnings fell by 3% in the third quarter, though adjusted earnings edged higher. Sales slightly increased by 0.7% compared with the same time last year, but they were still lower than Street forecasts. The company had previously warned of higher input costs biting into its quarterly results.  Monsanto's soybean segment took a hit in sales, though its corn business improved year over year. Shares were 0.2% lower at midday. 

 Apollo Group (APOL) shares plummeted by 8.6% after the firm posted disappointing third-quarter revenue results but offset some of the shortfall through ongoing cost-reduction initiatives. Management raised its fiscal 2014 cost-savings target, and  Morningstar analysts believe it is taking prudent steps to rightsize its cost structure for the evolving and highly uncertain environment. However, the analysts remain highly concerned that new degreed enrollments continued to fall precipitously and have outpaced the total enrollment decline.

Foreign Markets
European stocks were up following Draghi's comments. The FTSE 100 was 1.0% higher. The Paris CAC was 2.1% higher while the DAX gained 1.7%. 

Stocks in Asia were mixed, as the Shanghai Composite slipped by 0.4% and the Nikkei 225 lost 1.0%. The Hang Seng rose by 2.4%. 

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.