By Donna Kardos Yesalavich
NEW YORK (MarketWatch) -- U.S. stocks edged between minor gains
and losses Friday after third-quarter economic growth came in just
short of expectations while investors remained skittish about next
week's Federal Reserve meeting and midterm elections.
The Dow Jones Industrial Average (DJI) edged up 6 points, or
0.1%, to 11120. Microsoft (MSFT) led the measure's gains, up 2.2%.
The software giant's fiscal first-quarter profit climbed 51%,
benefitting from a continued strong response to the Windows 7
operating system and Office 2010, with each business seeing
year-over-year revenue growth.
Meanwhile, Chevron Corp. (CVX) and Merck & Co. (MRK) fell to
the bottom of the Dow. Chevron shares fell 1.7% after the oil
major's third-quarter earnings and revenue missed analysts'
expectations. Read more on Chevron.
Merck dropped 1.8% as the company's earnings excluding items
topped Street estimates, but revenue fell short.
The technology-heavy Nasdaq Composite (RIXF) was up 3.1 points
to 2,510, boosted by Microsoft. The Standard & Poor's 500-stock
index (SPX) edged up less than a point at 1184. The technology and
materials sectors led to the upside while the health-care sector
fell, hurt by Merck.
Monthly gains
Friday, which marks the 81st anniversary of the Crash of 1929,
is the final trading day of what has been a strong October for
stocks. Coming into Friday's session, the Dow was up 3% for the
month and the S&P 500 was up 3.7% for October, marking the
Dow's best October since 2006 and the S&P 500's best October
since 2003.
This month's climb has come as investors have increased
expectations the Federal Reserve will announce more stimulus at its
meeting next week, and that next week's midterm elections could
bring in a wave of pro-business politicians.
Ahead of those key events, data released Friday morning showed
the economy expanded in the third quarter at a slightly faster pace
compared to the previous quarter, but growth remains too weak to
cut unemployment any time soon. Gross domestic product, the value
of all goods and services produced, rose at an annual rate of 2%
after climbing 1.7% in the second quarter. Economists had expected
2.1% growth. Read more on third-quarter GDP.
"This is very anemic," said Michael Pento, senior economist and
vice president of managed products at Euro Pacific Capital. He said
2% economic growth is considered "below trend" for coming out of a
recession.
The report showed inflation remains very soft. The Fed's
preferred gauge, the price index for personal consumption
expenditures excluding volatile food and energy items, rose an
annualized 0.8% in the third quarter, below the second quarter's 1%
increase.
Still, with stocks wavering, investors said the GDP report was
not surprising and the market is now just marking time until next
week's Fed announcement.
"It all rests on the Fed and unless we had a materially
different GDP announcement today I think this is what you would
expect," said Gerald Buetow, chief investment officer at Innealta
Capital, a division of Al Frank Asset Management. "People are
saying this is kind of priced in."
Other economic figures released Friday were mixed.
Consumer-sentiment data from Reuters/University of Michigan showed
the consumer mood darkened at the end of October, while the Chicago
Business Barometer, formerly known as Chicago PMI, edged up from
September and topped expectations.
The dollar weakened slightly, with the U.S. Dollar Index (DXY) ,
which tracks the U.S. currency against a basket of six others, off
0.1%. Meanwhile, Treasurys edged higher, pushing the yield on the
10-year note (UST10Y) down to 2.63%. Crude-oil futures fell while
gold futures advanced.
Among stocks in focus, Genworth Financial (GNW) tumbled 12%. The
life insurer's third-quarter profit surged, but operating earnings
unexpectedly dropped as stronger international operations couldn't
offset weakness in life and mortgage insurance.
Monster Worldwide (MWW) shares soared 25%. The employment
website operator struck an optimistic tone as it reported
stronger-than-forecast bookings in its third quarter, leading the
company to narrow its loss projection for the year. The third
quarter was the first since early 2008 that Monster has seen
revenue, bookings and deferred revenue all grow year-over-year.
U.S. stocks wavered between small gains and losses Friday
morning as third-quarter economic growth came in just short of
expectations while investors grew skittish ahead of next week's
Federal Reserve meeting and midterm elections.
The Dow Jones Industrial Average (DJI) fell 12 points, or 0.1%,
to 11103, in early trading. Chevron (CVX) was the measure's worst
performer with a 2% drop. The oil major's third-quarter earnings
and revenue missed analysts' expectations. Exploration and
production earnings fell along with international earnings absent
$400 million of 2009 gains on asset sales and other impacts.
Microsoft (MSFT) climbed 2.8%. The software giant's fiscal
first-quarter profit climbed 51%, benefitting from a continued
strong response to the Windows 7 operating system and Office 2010,
with each business seeing year-over-year revenue growth.
The technology-heavy Nasdaq Composite (RIXF) climbed 0.2% to
2511, boosted by Microsoft, while the Standard & Poor's 500
index (SPX) slipped 0.1% to 1183. The financial sector led to the
downside, with the technology sector the only category in the
black.
Nevertheless, stocks are on pace to close in the black for the
month, marking the Dow's best October since 2006 and the S&P
500's best October since 2003. The climb has come in increasing
expectations for the Federal Reserve to announce more stimulus at
its meeting next week and for next week's midterm elections to
bring in a wave of pro-business politicians.
Ahead of those key events, data released Friday morning showed
the economy expanded in the third quarter at a slightly faster pace
compared to the previous quarter, but growth remains too weak to
cut unemployment any time soon. Gross domestic product, the value
of all goods and services produced, rose at an annual rate of 2.0%
after climbing 1.7% in the second quarter. Economists had expected
2.1% growth.
"This is very anemic," said Michael Pento, senior economist and
vice president of managed products at Euro Pacific Capital. He said
2% economic growth is considered "below trend" for coming out of a
recession.
Pento noted that the report showed inflation remains very soft.
The Fed's preferred gauge, the price index for personal consumption
expenditures excluding volatile food and energy items, rose an
annualized 0.8% in the third quarter.
"If that's what they're looking at, it's actually falling,"
Pento said, noting that the measure increased 1% in the second
quarter. "If the Fed has this mythical inflation target where they
want core PCE to be 2%, then there's nothing that's going to stop
[stimulus] from being launched."
The dollar strengthened, with the U.S. Dollar - tracking the
U.S. currency against a basket of six others -- up 0.1%. Treasurys
also edged higher, pushing the yield on the 10-year note (UST10Y)
down to 2.63%.
Crude-oil futures fell while gold futures advanced.
Among stocks in focus, Nasdaq OMX Group (NDAQ) climbed 2.3%. The
exchange operator's third-quarter earnings jumped 68%, topping
analysts' views, as revenue increased and the company had
year-earlier merger-related costs. Shares rose 1.4% premarket.
Halliburton (HAL) fell 4% as the company questioned cement tests
by a task force looking into the Deepwater Horizon disaster, saying
differences between those results and the company's "may be due to
differences in the cement materials tested." Federal investigators
had said Halliburton found repeated problems with the cement it was
planning to install in BP's (BP) doomed oil well in the Gulf of
Mexico but used it anyway -- perhaps without alerting BP.