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Stocks Hug the Flatline as Energy Sector and Oil Recover

NEW YORK (TheStreet) -- Stocks were hovering at the flatline by midmorning Friday as crude oil and the energy sector recovered from a selloff the day earlier. 

The S&P 500 was up 0.02%, the Dow Jones Industrial Average fell 0.1%, and the Nasdaq declined 0.11%.

Crude oil rebounded after a decline of more than 4% on Thursday. West Texas Intermediate crude jumped 2% to $49.14 a barrel after China National Petroleum forecast the nation's demand to grow 3% in 2015, above the International Energy Agency's 2.5% estimate.

The energy sector was the best performer on the S&P 500, though the Energy Select Sector SPDR ETF (XLE)  remained flat. Among large-cap oilers, the best performers included PetroChina (PTR) , Royal Dutch Shell (RDS.A) , BP (BP) and Total (TOT)

Pending home sales climbed 1.7% in January, slightly lower than a 2% consensus, but were at their highest level in 18 months and far better than a 3.7% drop a month earlier. By region, sales were flat in the Northeast, down 0.6% in the Midwest, up 3.2% in the South and up 2.2% in the West.  

Consumer sentiment crept higher to 95.4 in February from a preliminary 93.6 reading, according to the University of Michigan's index. Though that beat estimates of 94, the index fell from an 11-year high of 98.1 in January, its first drop in seven months. 

A second estimate of fourth-quarter GDP was trimmed to 2.2% from 2.6%, largely a result of a wider trade deficit and slower accumulation of business inventories than initially expected. Growth in consumer spending was also revised down by 0.1% to an increase of 4.2%, though remained at its fastest pace since early 2006. Economists had forecast a cut in GDP to as low as 2%.

"The usual suspects will claim that this slowdown in GDP growth signals some sort of underlying fragility in the US economy, perhaps triggered by the end of QE," said Paul Ashworth, chief U.S. economist at Capital Economics, in a note. "Ignore them. That's the same economy that added an average of 284,000 additional jobs in each of the final three months of last year. It's doing just fine and the Fed will start to hike rates in June."

Faith in a J.C. Penney  (JCP - Get Report) turnaround was shaken after the retailer reported a surprise fourth-quarter loss of 11 cents a share, compared to analysts' estimates of profit of 11 cents. Investments in revamping its department stores took a bite out of J.C. Penney's profitability. Shares were down 7.8%.

Bank of America (BAC - Get Report) shares were down 1.8% after the two members of its board as well as its chief accounting officer said they would be leaving the bank within weeks. Also pressuring shares, analysts at UBS cut their rating of the bank to "neutral" from "buy," noting that disclosures in recent annual filings have flagged potential failure of federal stress tests. 

After Federal Reserve Chair Janet Yellen addressed Congress earlier in the week, further hints of a rate hike timeline could come from Fed speeches at a monetary policy forum in New York on Friday. New York Fed President William Dudley, Cleveland Fed President Loretta Mester, and Fed Vice Chair Stanley Fischer all will speak.

European markets were mixed. Earlier, Germany's parliament approved a four-month extension of Greece's bailout plan, the last major hurdle to approval as other European Union countries are largely expected to pass the vote. 

Japan's Nikkei closed slightly higher, resisting downward pressure after consumer inflation in January missed estimates. Consumer prices over the month rose 2.2%, below a forecast 2.3%, though excluding the effects of a tax hike last year, prices rose only 0.2%.

Gap (GPS) shares were up more than 4% after raising its buyback program to $1 billion and increasing its annual dividend to 92 cents a share from 88 cents.

Herbalife (HLF) slid 5.3% as 2015 guidance came in weaker than expected. The health supplements company beat earnings expectations in its most recent quarter.

FedEx (FDX) shares were up 1.7% on an upgrade from Credit Suisse to "neutral" from "outperform." Analysts increased price targets to $203, arguing higher growth at its U.S. Ground Network business would boost margins. 

--Written by Keris Alison Lahiff in New York.

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