Stocks Lose Some Steam

The 10-year Treasury note rose 11/32, its yield falling to 4.13%. The dollar was slightly weaker vs. the Japanese yen and the euro, with the euro lately worth about $1.2472. The U.S. currency was fetching 105.77 Japanese yen.

Profits and Economic Growth

The pace of economic growth decelerated to 4% annualized in the fourth quarter from 8.2% in the prior quarter. Corporate profits, however, surged in the fourth quarter by 30%, up sharply from last quarter's 20.3% gain, according to Bloomberg. This is based on the average-weighted earnings growth for the companies in the S&P 500 that have reported thus far.

This divergence appears odd at first glance, but historically the correlation between GDP and corporate profits is rather low. This is because its takes time before economic growth trickles down to the bottom line.

"There is a perception that as more goods and services are produced in this country, corporate America should be doing better," said Art Hogan, chief market analyst at Jefferies.

However, there is usually a significant lag, Hogan pointed out. "GDP is a very broad based measure. Profits have to with not just selling the goods, but getting there as well." While GDP will be bolstered as companies build inventories, earnings will take other factors, such as expenses and corporate debt, into account.

Put simplistically, its takes a quarter for companies to produce the goods and then a few quarters to sell them.

Movers

In earnings, Anadarko Petroleum(APC Quote) said fourth-quarter earnings were $1.17 a share, missing analysts' consensus for $1.18 a share. Revenue was up 14.6%. The shares climbed $1.10, or 2.3%, to $49.90.

Wendy's (WEN Quote) earned 56 cents a share in its quarter, a 12-cent improvement over last year and 2 cents ahead of expectations. The stock rose 3 cents, or 0.1%, to $39.73.

Frontier Airlines(FRNT Quote) said late Thursday that it earned 16 cents a share in the third quarter, excluding certain items. Analysts' consensus, however, was for a profit of 17 cents a share. Revenue surged 36%. The stock shed 24 cents, or 2.4%, to $9.76.

Pixar (PIXR Quote) has decided to end its distribution deal with Walt Disney (DIS Quote), after months of negotiation. Pixar surged $2.19, or 3.4%, to $66.39, and Disney slipped 48 cents, or 2%, to $23.97.

In broker actions, J.P. Morgan upgraded shares of Yahoo!(YHOO Quote) and Yum! Brands(YUM Quote). Yahoo! stock gained 89 cents, or 1.9%, to $46.98, and Yum! Brands improved $1.36, or 4.2%, to $33.92.

First Albany downgraded shares of Bristol-Myers Squibb(BMY Quote). The stock lost 77 cents, or 2.7%, to $28.05.

Deutsche Bank downgraded PeopleSoft(PSFT Quote) and JetBlue(JBLU Quote). PeopleSoft shed 39 cents, or 1.7%, to $22.60, and JetBlue dropped 83 cents, or 3.5%, to $22.66.

Looking ahead, earnings season marches on next week; so far about 60% of the S&P 500 have released forth-quarter profits. On Monday, International Paper (IP Quote)and Boston Scientific (BSX Quote) are set to report.

In economic news, December personal income and spending figures will be released at 8:30 a.m. EST and are expected to rise by 0.2% and 0.5%, respectively. At 10:00 a.m. EST, the Institute for Supply Management's manufacturing Index for January will be released and is expected to improve slightly to 64.0 from 63.4.