Disappointing growth in the nation’s gross domestic product pushed stocks lower Friday even as investors welcomed a $57 billion merger between Procter & Gamble Co. and Gillette Co. Despite the losses, the major indexes eked out the first winning week of 2005.
While investors were cheered by P&G’s bid for Gillette and strong profits from Microsoft Corp., surprisingly weak economic data robbed the markets of any buying momentum. The Commerce Department reported that the GDP — the value of all goods and services produced in the United States — rose at an annual rate of just 3.1 percent in the fourth quarter, the lowest gain in seven quarters. Economists had expected a 3.5 percent rise.
With elections in Iraq on Sunday, a Federal Reserve meeting beginning Tuesday and the Labor Department’s monthly job creation report due next Friday, investors used the GDP figure as another reason to sell stocks ahead of these uncertainties.
“The thought is that the GDP was a disappointment, but I don’t know if anybody really cares about GDP. It’s not the end of the world,” said Brian Pears, “This market has been in a very strong bearish trend for the entire year, such as it is. It’s like people walk in every day to find a reason to justify that trend because they’re afraid.”
The Dow Jones industrial average fell 40.20, or 0.4 percent, to 10,427.20.
Broader stock indicators also gave ground. The Standard & Poor’s 500 index was down 3.19, or 0.3 percent, at 1,171.36, and the Nasdaq composite index lost 11.32, or 0.6 percent, to 2,035.83.
The market finally paid attention to strong earnings and generally positive economic data over the past week, resulting in a strong two-day rally. However, anxiety over the Iraqi elections and Friday’s GDP number erased much of those gains.
Nonetheless, the major indexed were positive for the week — barely. The Dow rose 0.33 percent, the S&P 500 was up 0.3 percent and the Nasdaq climbed a meager 0.08 percent. That reversed a three-week slide for all three indexes.
Wall Street had expected the economy to slow somewhat from the 4 percent annual pace posted in the third quarter of 2004, but Friday’s GDP reading showed far more of a slowdown than analysts had believed. That raises concerns about profit growth for future quarters as well as the health of the labor market.
The Federal Reserve is scheduled to meet next Tuesday and Wednesday, and is widely expected to raise the nation’s benchmark interest rate to 2.5 percent from the current 2.25 percent. While there have been concerns about rising prices and inflation, slower economic growth could keep the Fed from a more aggressive rate policy.
Declining issues outnumbered advancers by more than 4 to 3 on the New York Stock Exchange, where volume came to 1.64 billion shares, compared with 1.6 billion on Thursday.
The Russell 2000 index of smaller companies was down 3.90, or 0.6 percent, at 613.00.
Overseas, Japan’s Nikkei stock average fell 0.18 percent. In Europe, Britain’s FTSE 100 closed down 0.42 percent, France’s CAC-40 dropped 0.54 percent for the session, and Germany’s DAX index lost 0.35 percent.
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