By STEVE ROTHWELL
NEW YORK (AP) â¿¿ Stocks edged lower after a report that showed the U.S. economy unexpectedly contracted in the fourth quarter, putting the brakes on a January rally that has pushed stocks toward record levels.
The Dow Jones industrial average fell 23 points to 13,931 as of 2:40 p.m. EST. The Standard & Poor's 500 fell 3 points to 1,505. The Nasdaq composite fell 4 points to 3,152.
The U.S. economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles, the Commerce Department said Wednesday.U.S. gross domestic product, the volume of all goods and services produced, contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter. "We have a negative print on GDP. To ignore this is folly," said Doug Cote, chief market strategist at ING Investment Management. "Certainly, this market could continue to move forward, but ignoring the fundamentals is not something I'd counsel my clients to do." Positive company earnings reports helped offset the disappointing news about the economy. Amazon jumped $13.49 to $273.70 after the world's biggest online retailer showed improving profit margins when it posted fourth-quarter earnings late Tuesday. Boeing, currently scrambling to fix battery problems that have grounded its 787 Dreamliner planes, gained 88 cents to $74.53 after it reported earnings that beat analysts' expectations. Rising profits from commercial jets offset a smaller profit from defense work. The Dow Jones average has surged 6.3 percent since the start of the year, climbing close to 14,000 and within touching distance of its record level. Investors bought stocks after lawmakers reached a deal to avoid the "fiscal cliff" and on optimism the U.S. housing market is recovering and the jobs market is slowly healing.