Wall Street lower after GDP data shows contraction

29 May 2015 | Author: | No comments yet »

U.S. Stocks Open Lower.

U.S. stocks were lower in morning trading on Friday after data showed the economy shrunk in the first quarter and corporate profits declined the most in a year. The U.S. government slashed its gross domestic product estimate to show GDP shrinking at a 0.7 percent annual rate instead of the 0.2 percent growth pace it estimated last month. “Monetary policy from the Fed is forward looking and GDP by definition is a rear view mirror and the important thing now is that it wasn’t a big miss,” said Adam Sarhan, chief executive of Sarhan Capital in New York. “So far, the Fed’s been data dependant and the data including today’s GDP numbers on average continues to be weaker than expected, which removes imminent threat from the Fed to raise rates,” Sarhan said.

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. United Rental (URI.N) 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”. European stocks SXXP, -1.19% 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. Rosetta Stone (RST.N) 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 (ALTR.O) rose as much as 6.1 percent to a near 15-year high of $49.83 after the New York Post reported that Intel (INTC.O) 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, -1.21% were lower after the company unveiled Android Pay, a new mobile payment service that is expected to compete directly with Apple Inc.’s AAPL, -1.04% Apple Pay.

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