Updated from 4:02 p.m. EST
Stocks closed lower Friday with the
snapping its nine-week winning streak, after a batch of mixed economic data added to existing investor uneasiness over the outlook for interest rates.
lost 22.22 points, or 0.2%, to 10,488.07; the S&P 500 shed 2.99 points, or 0.3%, to 1131.13; and the
fell 2.08 points, or 0.1%, to 2066.15
The Dow finished the week down 0.8%, the S&P 500 dipped 0.9% and the Nasdaq declined 2.7%. Both the blue-chip and tech indices closed lower for the second week in a row for the first time since mid-November.
Volume on the New York Stock Exchange was 1.64 billion shares, while 1.9 billion shares exchanged hands on the Nasdaq. Despite the losses, advancers outpaced decliners by about 5 to 4 in both markets.
"Investors are still digesting what the
said on Wednesday and trying to figure out what groups are going to do well, if we are in an interest rate rising environment," said Todd Leone, a senior trader at SG Cowen. "If we are in a rate-rising environment, I don't expect a hike for another four to six months.
"I don't think the economic statistics are that important, except for labor," Leone continued. "The Fed is looking at jobs, and that is why they have held off so much."
In economic news, gross domestic product expanded by a 4% annualized rate in the fourth quarter, after the prior quarter's 8.2% surge; economists had expected the economy to grow by 5%. Providing some consolation to stocks, the price deflator decelerated to 1.0% from 1.6% in the third quarter, with the consensus looking for a 1.3% increase. Virtually every measure of inflation remains benign and should not force drastic Fed tightening.
Much stronger than expectations, the Chicago purchasing managers index rose to 65.9 in January from last month's revised 61.2 reading. The consensus was looking for a slight rise to 62.1.
The University of Michigan revised its January consumer sentiment reading up marginally to 103.8 from 103.2, close to expectations. In December, the survey stood at 92.6.
Markets overseas finished mostly lower. London's FTSE 100 fell 0.5% to 4391 and Germany's Xetra DAX dropped 0.9% at 4059. In Asia, Japan's Nikkei finished fractionally higher at 10,784, and Hong Kong's Hang Seng lost 0.3% at 13,289.
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
. 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.
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.
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.
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.
has decided to end its distribution deal with
, 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! 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
. The stock lost 77 cents, or 2.7%, to $28.05.
Deutsche Bank downgraded
. 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,
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.