Stocks stall on tepid US economic growth

NEW YORK (AP) ? The stock market stalled Friday after the U.S. economy didn't grow as much as hoped and earnings from a handful of big companies failed to rev up investors.

Economic growth accelerated to a 2.5 percent annual rate in the first three months of the year, the government said. But it was below the 3.1 percent forecast by economists.

The shortfall reinforced the perception that the economy is grinding, rather than charging, ahead. Investors have also been troubled by reports in the last month of weaker hiring, slower manufacturing and a drop in factory orders. Many economists see growth slowing to an annual rate of around 2 percent a year for the rest of the year.

The dollar dropped and U.S. Treasuries, where investors seek safety, rose after the report.

"There are some concerns as we head into the summer," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "In the last three weeks, we've have seen numbers that weren't exactly what you'd love to see."

Corporate earnings this week have also contained worrisome signs. Many companies missed revenue forecasts from financial analysts, even as they reported higher quarterly profits. For example, Goodyear Tire slipped 3 percent to $12.55 Friday after revenue fell short of analysts' estimates, hurt by lower global tire sales.

Of the companies that have reported earnings so far, 70 percent have exceeded Wall Street's expectations, compared with a 10-year average of 62 percent, according to S&P Capital IQ. However, 43 percent have missed analysts' revenue estimates.

The S&P 500 index was little changed at 1,585, as of 3:35 p.m. having spent most of the day lower.

The Dow was up, gaining 31 points, or 0.1 percent, at 14,717. The index got a big lift from Chevron's stock. Profit for the U.S. oil company beat expectations of financial analysts in the first quarter, pushing shares up $1.29, or 1 percent, to $119.80 on Friday.

Both indexes were up for week and remain slightly below their all-time highs from April 11. The Dow index was 1.2 percent higher this week while the S&P gained 1.9 percent.

The market has been bolstered by the Federal Reserve's easy money policy. And the disappointing growth figure for the economy will ensure that the Fed sticks with its stimulus policy, providing a support for stocks, said Peter Cardillo, chief market economist at Rockwell Global Capital.

"The economic data that we've been getting points to no early exit for the Fed's stimulus," Cardillo said.

The Nasdaq composite was down 4 points at 3,289, a decline of 0.6 percent. The index is still 2 percent higher this week.

The tech-heavy index has lagged both the Dow and the S&P 500 this year, but led the way higher this week, boosted by Microsoft. The software giant, which makes up 5.3 percent of the Nasdaq, is on track to record its biggest weekly gain since January last year, after reporting earnings April 19 that beat Wall Street expectations and revealing an aggressive push into the computer tablet market.

Even Apple, the largest stock in the Nasdaq, had a good week, advancing 5.8 percent to $413.20, despite posting a decline in quarterly profit Tuesday. Apple accounts for 7.6 percent of the index's value and the weekly gain was its biggest since November.

Among big names that investors were focusing on Friday, Amazon.com fell 7 percent to $255.20 after the company warned of a possible loss in the current quarter. And in the first quarter, the online retailer reported lower income fell as it continued to spend heavily on the rights to digital content. Expedia fell 11 percent to $58.15 after the online travel company's reported a quarterly loss.

Homebuilder D.R. Horton surged 8 percent to $26.48 its income nearly tripled thanks to a continuing recovery the housing market. The results were handily beat the forecasts of financial analysts who follow the company.

J.C. Penney jumped 8.5 percent to $16.52 after the billionaire financier George Soros disclosed that he had taken a 7.9 percent stake in the struggling company.

In government bond trading, the yield on the 10-year Treasury note slipped to its lowest rate of the year ? to 1.67 percent from 1.71 percent. The yield has fallen from 2.06 percent six weeks ago.

The dollar weakened 0.2 percent against the euro.

The European currency bought 1.3025 dollars per euro at the end of day, compared with 1.3004 at the start of trading. The dollar index, which measures the strength of the U.S. currency against a group of other world currencies including the Japanese yen and the euro, dropped 0.3 percent, to 82.52 from 82.74.

Source: http://news.yahoo.com/stocks-stall-tepid-us-economic-growth-195845422.html

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