The “Magic” of texting (2/27/15)
Stocks traded slightly lower today as investors received mixed signals about the country’s economy.
The Dow lost 81 points, with 21 of its 30 components declining; the S&P 500 Index fell 6; and the Nasdaq was down 24. Decliners led advancers by eight to seven on the NYSE, but advancers outpaced decliners by more than four to three on the Nasdaq. Treasury prices strengthened. Gold futures rose $3.00 to close at $1,213.10 an ounce, and the price of crude oil climbed $1.49 to settle at $49.76 a barrel.
For the month, the Dow and S&P 500 Index each gained 5% and the Nasdaq rose 7%.
In Earnings News:
- Higher sales during the fourth quarter weren’t enough to offset increased markdowns and promotions for department store chain J.C. Penney. The company posted an unexpected loss of 19 cents a share, versus a profit of 11 cents a share a year ago. Excluding restructuring charges, the loss was less than a penny. J.C. Penney’s shares (JCP) fell 6.8%.
- Shares of clothing retailer Gap (GPS) gained 3.05% as the company posted better-than-expected fourth quarter earnings. The company’s profit rose 4% to 75 cents a share on sales of $4.71 billion. Gap provided a weaker full-year earnings outlook, citing the recent labor dispute at West Coast ports and a stronger dollar.
In Other Business News:
- Fourth quarter U.S. gross domestic product grew at a 2.2% annual pace, according to the Commerce Department, down from the 2.6% rate estimated in January. The downward revision was attributed to a slowdown in businesses stockpiling goods and a widening trade deficit. For the full year, GDP rose 2.4%, versus 2.2% in 2013.
- Winter weather and higher fuel costs combined to slightly diminish consumer confidence in February. The final reading of the University of Michigan consumer sentiment index fell to 95.4, the first drop in seven months. Despite the decline, most consumers still believe their financial situation is better than it was prior to the recession.
- The National Association of Realtors reported that its seasonally adjusted pending home sales index increased by 1.7% in January to its highest level in eighteen months. The index is 8.4% higher than it was a year ago.
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The Silicon Valley startup with the most buzz (this week, at least) is based not on the latest and greatest technology. It uses something that was invented 23 years ago and is one of the most basic features of your phone: texting.
A group of developers wondered how much you could actually accomplish by sending a simple text. It turns out, quite a lot. They launched a service called Magic where customers can text a request to a service center, and that request would “magically” be fulfilled. Here’s an example:
You: I have a serious craving for waffles after reading yesterday’s Daily Advantage. Bring me a waffle. The best waffle in town.
Magic: I’ve located the best waffle in town for you and can have it delivered by 11:30 for $20.39. Is that ok?
You: Yep.
Magic: Your waffle will be delivered by 11:30.
Abracadabra! A waffle appears at your front door (once you’ve provided an address and credit card information … this is magic, not ESP). But really, there’s no voodoo involved. Magic’s operators serve as intermediaries, tracking down information and placing orders for you. Did I mention the undisclosed service fee? No free lunch here.
The team had no idea that they had stumbled on gold mine. Their user base catapulted from 30 people to thousands after someone posted a link to Magic’s website on HackerNews. They tracked down family and friends in order to have enough people on hand to process requests, and they instituted a wait list due to the increased demand. (Although $50 is enough to jump to the head of the line.) 30 people are manning the phones, and they’ve already received 1,000 job applications.
Online delivery services aren’t new, but chances are unless you live in a big city, you’re unlikely to find one you can use. Logistics are hard, and most of these startups are taking it slow to make sure they have everything just right. Magic, for now, is taking the opposite approach. They’re available everywhere with the intent to provide you with anything you want (legally, of course). Initial reviews of the service are mixed, most likely because it’s struggling to scale.
This is something we need to keep between you and me, because the last thing I need is for my kids to find out about a service that will give them anything their hearts’ desire with a simple text.
Kid: Mom, can we get another puppy?
Mom: No.
Kid: Dad, can we get another puppy?
Dad: Absolutely not.
Kid: Magic, I want a beagle puppy.
Magic: I’ve located your puppy and can deliver it to you this weekend for $525.37. Is that ok?
Kid: YEAH!!!!!!!!!!!!
