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TheStreet Open House

Stocks Pull Back From Session Lows as Earnings Fuel Volatility

NEW YORK (TheStreet) -- Stocks pulled back from session on Friday as Wall Street digested a wave of earnings that were mixed across the board. Data showed the U.S. economy grew at a slower-than-expected pace in the fourth quarter, contributing to investors' downbeat attitude on Friday. 

The S&P 500 was down 0.33%, the Dow Jones Industrial Average slipped 0.52%, and the Nasdaq fell 0.13%. Stocks gave back some of the gains achieved in a late-day rally on Thursday.

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U.S. GDP rose 2.6% in the fourth quarter, lower than an expected 3.2% gain, as business spending remained weak. The pace was nearly half the third-quarter's blockbuster 5% growth. However, consumer spending was stronger than expected at 4.3%, a sign lower gas prices were continuing to prop up sentiment.

"While consumers were able to maintain an arguably heightened level of spending through the end of the year thanks to price reprieve at the pump, that additional spending power is hardly a supplement for a continuing lack of income growth and earnings opportunity," said Sterne Agee chief economist Lindsey Piegza.

Investors will get a chance to see how wage growth fares in the nonfarm payrolls report for January that is due next Friday. Average hourly wages fell 0.2% in December.

The sheer number of large-cap earnings out this week has caused market waves over the past five days. The trend continued on Friday with benchmark indexes yo-yoing from deep to slight losses.

On the positive earnings side, Amazon (AMZN - Get Report) soared more than 14% after turning a quarterly profit of 45 cents a share, 28 cents above expectations. The e-commerce juggernaut said gross margins rose 300 basis points from a year earlier to 29.5%. Google (GOOGL) was up 5.3% despite missing profit and sales expectations. Ad prices slipped 3% quarter on quarter on low smartphone rates.

MasterCard (MA) jumped 1.4% as fourth-quarter profit of 69 cents a share beat by 2 cents and revenue surged 14% from a year earlier. The world's second-largest credit card company reported a 29% increase in profit.

Hurt by a stronger U.S. dollar, Mattel (MAT) posted a continued drop in sales with Barbie revenue down 12% and Fisher-Price falling 11%. Shares were up 2.3% after an earnings call in which management promised a "heightened" sense of urgency to addressing weak sales. Drugmaker Eli Lilly (LLY) also suffered foreign exchange fluctuations, reporting sales down 12% to $5.12 billion. Shares were up 1.3%.

"The dominant theme of earnings season has been the currency translation risk," said Natixis' David Lafferty. "Companies are actually beating their forecasts, so it's been a reasonably good [season] in terms of realized earnings. The problem has been their outlook going forward."

Chevron (CVX) dropped 0.83% despite beating low expectations in its fourth quarter. Earnings of $1.85 a share beat by 21 cents, while revenue of $46.09 billion came in much higher than an expected $30 billion. Sales dropped 18% as oil prices plunged.

Earnings have taken Wall Street's focus in what has been one of the busiest reporting weeks of the season. Microsoft (MSFT) , Qualcomm (QCOM) , Apple (AAPL) and Facebook (FB) were among the companies that reported earlier in the week.

Russia's central bank unexpectedly cut interest rates by 200 basis points to 15%, only a month after raising rates to that level. Russia has been under pressure, skirting a recession, as oil prices plunged and Western sanctions following the Ukraine conflict crippled the economy.

Russian ADRs were being pulled lower on Friday. Mobile Telesystems (MBT) , Yandex (YNDX) and Qiwi  (QIWI) were down, while the Direxion Daily Russia ETF (RUSL) plummeted more than 5%.

Burger chain Shake Shack began trading Friday under the symbol (SHAK) . Shares rocketed 131% higher to $48.74, more than double its IPO price of $21 a share.

Among other companies moving markets, Costco (COST) was up 2% after issuing a special $5 per share dividend, its largest dividend payout since 2012. AOL (AOL) slid 0.82% on reports the company will cut 150 positions, or around 3% of its total workfoce, after combining several of its website properties including Joystiq and Engadget.

The Chicago Purchasing Managers Index jumped to 59.4 in January, up from 58.8 a month earlier, and higher than an expected 57.5 reading. The ISM Manufacturing Index, a broader measure of economic health, will be released Monday.

"Manufacturing sector momentum has fared considerably better than expected into the new year, and creates some offset to the slowing suggested by regional manufacturing sector indicators," said Gennadiy Goldberg, U.S. strategist at TD Securities. "We look for next week's ISM manufacturing sector report to show modest slowing, but expect growth in the mid-50s to remain consistent with "solid" levels of economic activity."

U.S. consumer sentiment rose in January to its highest level in 11 years. The University of Michigan's final reading for January jumped to 98.1 from 93.6 a month earlier.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

--Written by Keris Alison Lahiff in New York.

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