US STOCKS-Wall St lower after GDP data shows contraction

29 May 2015 | Author: | No comments yet »

U.S. Stocks Open Lower.

The second estimate of gross domestic product showed the economy shrank at an 0.7% annual pace during the first three months of the year versus a 0.2% growth estimated previously. The GDP report also showed that corporate profits declined 8.7 percent – the largest drop in a year and the second straight quarterly fall – as the dollar weighed on multinational corporations and oil prices hurt domestic firms.

A euro zone official said Greece will not be able to get the money still available under its current bailout plan if it does not agree to the outline of a reforms-for-cash deal with creditors by the end of next week. Investors have closely watched economic growth for indications on whether the Federal Reserve may delay raising interest rates, which some investors worry may hurt stock performance.

Michael Arone, chief investment strategist at State Street Global Advisors U.S. business, said while the revision was better than expected, he is still looking for signs that the weakness was transitory and weather related. “While we did pay attention to the drop in earnings in the report, that can be explained by the stronger dollar, which hurt a lot of multinational companies and the drop in oil prices that hurt energy firms. Also weighing on stocks Friday morning was a decline in the Chicago Business Barometer, a survey of Chicago area purchasing managers that provides insight on companies’ business plans.

ET (1355 GMT), the Dow Jones industrial average <.dji> was down 50.55 points, or 0.28 percent, at 18,075.57, the S&P 500 <.spx> was lower by 4.01 points, or 0.19 percent, at 2,116.78 and the Nasdaq Composite <.ixic> was off 6.02 points, or 0.12 percent, at 5,091.95. The decline, which put the index below 50, indicates that factory activity is contracting. “The market is in a wait-and-see mode to see, was the weakness in the first quarter temporary or was it something more permanent,” said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments, which manages roughly $500 billion. European stocks SXXP, -1.21% eased as a deadline approached for Greece to make the first of debt repayments to the International Monetary Fund in the space of two weeks.

United Rental was the biggest drag on the industrial sector with a 3.9 percent fall to $91.23 after Bank of America Merrill Lynch downgraded the equipment rental company’s stock to “underperform” from “neutral”. Rosetta Stone rose 15.7 percent to $7.44 after the education technology company said its board received an expression of interest from RDG Capital Fund Management. Altera rose as much as 6.1 percent to a near 15-year high of $49.83 after the New York Post reported that Intel was close to buying the chipmaker for about $15 billion.

So far this week, stocks have bounced around as investors grappled with news out of Greece, a mixed bag of economic data and a wave of new merger announcements. GOOG, -1.30% were lower after the company unveiled Android Pay, a new mobile payment service that is expected to compete directly with Apple Inc.’s AAPL, -1.05% Apple Pay.

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