By Donna Kardos Yesalavich
NEW YORK (MarketWatch) -- U.S. stocks hugged the flatline Friday
after third-quarter economic growth came in short of expectations
and as investors remained skittish about next week's Federal
Reserve meeting and midterm elections.
The Dow Jones Industrial Average (DJI) was up 0.01% at 11114.4
in recent trading. Microsoft (MSFT) led the measure's gains, up
1.9%. 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 2% as the company's earnings excluding items
topped Street estimates, but revenue fell short.
The technology-heavy Nasdaq Composite (RIXF) was up 7 points to
2,514, boosted by Microsoft. The Standard & Poor's 500-stock
index (SPX) was slightly lower at 1183.72.
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 9%. 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 27%. 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.