Stocks sag on weak GDP reading
Stocks sagged Thursday as the latest gross domestic product reading came in below expectations and raised more questions about the strength of the economy — in spite of robust earnings and higher forecasts from Procter & Gamble Co. and other companies. The Dow Jones industrial average slid more than 125 points.
With more than 50 companies in the Standard & Poor’s 500 reporting results, it was one of the busiest days of the earnings season. But investors were distracted from mostly positive corporate news by the disappointing GDP report, which aggravated inflation worries and renewed concerns that Federal Reserve policy makers would take a more aggressive posture on rates when they meet next week.
“I think the GDP numbers have kept inflation on the front burner and that’s obviously weighing on the day’s action,” said Bryan Piskorowski, market analyst at Wachovia Securities. “But bonds are not reacting super badly to these numbers. We’re at a pivotal point right now. What the bond market is trying to do is determine at what point do we see light at end of the tunnel with regard to the Fed? So we’re taking some solace in that.”
The Dow fell 128.43, or 1.26 percent, to 10,070.37.
The broader gauges also fell. The S&P 500 index was down 13.16, or 1.14 percent, at 1,143.22. The Nasdaq composite index declined 26.25, or 1.36 percent, to 1,904.18, its lowest close since Oct. 14.
Treasury prices rallied, with the yield on the 10-year note slipping to 4.15 percent — its lowest point since mid-February — from 4.23 percent late Wednesday. The U.S. dollar was mixed against other major currencies; gold prices fell. Crude futures, down for most of the day, rebounded to settle 16 cents higher at $51.77 on the New York Mercantile Exchange.
Lofty energy prices and weaker consumer and business spending was a drag on the economy during the first quarter; the Commerce Department said GDP grew at an annual rate of just 3.1 percent in the first three months of the 2005, the slowest pace of expansion in two years. The broadest barometer of the economy’s health, GDP measures the value of all goods and services produced within the United States. Economists had forecast growth of 3.5 percent.
An inflation gauge tied to the GDP report and closely monitored by the Fed showed a 2.2 percent rise in prices, excluding food and energy. That was up considerably from the 1.7 percent rate recorded in the fourth quarter, and marked the highest reading since the final quarter of 2001.
Decliners outnumbered advancers by about 3 to 1 on the New York Stock Exchange. Preliminary consolidated volume came to 2.20 billion shares, compared with 2.14 billion traded Wednesday.
Overseas, Japan’s Nikkei stock average rose 0.03 percent. In Europe, France’s CAC-40 slid 0.41 percent, Britain’s FTSE 100 added 0.02 percent and Germany’s DAX index was down 0.26 percent.