Stock Futures Slide Before 3rd-quarter GDP Report

STEPHEN BERNARD

NEW YORK (AP) â¿¿ Stock futures are lower after the government says the economy continues to grow at a sluggish pace.

The gross domestic product, the broadest measure of the nation's economy, grew at a 2 percent rate during the third quarter. That's in line with what economists had forecast.

Traders are cautious about the health of the economy, particularly ahead of next week's midterm elections and amid speculation over the size of economic stimulus measures expected from the Federal Reserve.

Dow Jones industrial average futures are down 24, or 0.2 percent, at 11,025. S&P 500 futures are down 4, or 0.3 percent, at 1,176, while Nasdaq 100 futures are down 7, or 0.3 percent, at 2,119.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

NEW YORK (AP) â¿¿ Stock futures fell Friday as investors grew more cautious before the government provides its first look at how fast the economy expanded during the third quarter.

Uncertainty heading into next week's midterm elections and speculation over the size of economic stimulus measures expected from the Federal Reserve have also added to the guarded tone hanging over the market.

Economists expect the gross domestic product grew at a meager 2 percent annual rate during the third quarter, far short of what would be needed to reduce the high unemployment rate. However, a 2 percent economic growth rate would mark a small improvement from the 1.7 percent rate reported during the second quarter.

The pace of growth will be closely watched because it is the broadest measure of economic growth. The data could also play a role in how much money the Fed decides to spend on an expected stimulus program. Stocks rose sharply during the first half of October as expectations mounted that the Fed would start buying Treasury bonds to drive interest rates lower. That, in turn, is supposed to spark spending and lending. But in recent days, the size of the bond-buying program has been questioned, putting a market rally on hold.

The Dow Jones industrial average has fallen 0.2 percent this week, but is up 3 percent for the month.

The Fed wraps up its meeting Wednesday. It is expected to announce the bond buying program then.

A day before the Fed completes its meeting, voters will head to the polls for the midterm elections. Traders have been betting that Republicans will at least take control of the House of Representatives, which could slow government action.

Analysts say uncertainty over tax issues and potential costs from health care and financial regulation reform bills have been major reasons employers have been hesitant to start hiring new workers. The results of the election should provide more clarity about those questions.

With so many people unsure about their jobs, they have cut back on their spending, which accounts for the biggest piece of the nation's economy. Spending won't likely pick up in a meaningful way until employers start ramping up hiring.

Ahead of the opening bell, Dow Jones industrial average futures fell 29, or 0.3 percent, to 11,020. Standard & Poor's 500 index futures fell 4.40, or 0.4 percent, to 1,174.90, while Nasdaq 100 index futures fell 6.75, or 0.3 percent, to 2,119.00.

Bond prices traded in a tight range. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 2.66 percent compared with late Thursday.

In corporate news, Microsoft Corp. shares rose in pre-opening trading after the computer software maker said its profit jumped because businesses increased their spending on technology.

Businesses have been quicker to spend coming out of the recession on new technology to improve efficiencies than spend to hire new workers. It has helped many companies beat earnings expectations in recent quarters even though for many U.S. sales remain weak.

Microsoft's shares rose 72 cents, or 2.7 percent, to $27.00.

Pharmaceutical company Merck & Co. reported a 90 percent drop in profit because of charges tied to its acquisition of Schering-Plough Corp. Adjusted earnings beat forecasts, but its revenue fell short of expectations.

Copyright 2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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