Duane Bennett Led by banks, stocks jump after strong report from China Article 9 & 10

(4/17/2017) The United States stock market bounced back today after recent losses when the Chinese

government announced that their economy had grown at a slightly faster pace in the first quarter than expected. Banks

responded well as interest rates recovered due to the announcement. Stocks had their most significant improvement in

more than a month. In particular, stocks that would benefit most from the faster global economic growth experienced the

best gains. Among the top performers were: M&T Bank, Nvidia, Google, and Amazon.

This article demonstrates the interdependence1 (dependence between two or more countries upon each other)

between economies worldwide. The growth in China impacted interest rates2 (cost of borrowing funds) which affected

banks3 (intermediaries between savers and borrowers that minimize the cost of bringing the savers and borrowers

together). The Gross Domestic Product4 (the total value of all final goods and services produced domestically over a period

of time) for China had its strongest reading in several quarters. The growth was primarily attributed to increases in

infrastructure spending and the housing market. Infrastructure spending is a piece of government purchases5 (purchases

by federal, state and local governments of final goods and services). The growth in the housing market is piece of gross

private domestic investments6 (the creation of new structures, capital equipment and inventory expansion), it is

considered a construction investment7 (all construction including residential).

Investigations and legislation8 (government regulation) by the Justice Department and the Food and Drug

Administration (FDA) have impacted the economy and several businesses mentioned in the article. Alere, a medical device

manufacturer recalled a key product and was under investigation. Eli Lilly and Incyte were impacted by a FDA refusal of a

product. The refusal has affected expectations9 (worries of anticipated activities) on the price of their stock and the prices

of their other medical products. The increase of regulation against the companies create a supply curve shift10 (a change in

anything but price that affects the supply curve), in this case reducing the supply curve.

Paper assets11 (stocks and bonds) were impacted differently. Stocks rose over the time frame described in the

article. Bonds fell in price due to a decline in yields and low interest rates. Commodities12 (goods that serve as a value of

money) like gold and copper rose in value. The dollar fell in comparison to the yen and increased in comparison to the

euro. This an example of the dollar as currency13 (when money is specifically used as a medium of exchange). The dollar

itself is form of fiat14 (a good, the value of which is less than the value it represents as money).
 Natural resources15 (anything in the air, on the land, in the land, on the sea, and in the sea used for economic gain)

such as oil fell. This impacted the entire energy market. This impacted the prices on gasoline and heating oil. Natural gas

also fell 2 percent. This could be demonstrated by seasonal models16 (highly simplified representations).

Technology17 (the application of scientific knowledge as a resource) companies climbed primarily on the strength

of their services18 (intangible goods) sections such as wireless licensing agents. Netflix, the media streaming service, also

gained 3 percent.

Food manufacturers did not do well. Snyder-Lance who makes pretzels, and other salty snacks lost 15.4 percent

after a weak forecast. It included more spending on marketing19 (the act of promoting or selling goods and services), and

lower profit margins. This could be occurring because people are no longer viewing their product as a normal good20

(goods that increase in demand as incomes increase), and could be subject to the wealth effect21 (as paper assets gain value

consumers feel more comfortable and are more likely to increase spending).

Article referenced:

Jay, Marley. Led by banks, stocks jump after strong report from China. KSL.com, 17 Apr 2017.

Internet. Associated Press.