By STEVE ROTHWELLNEW 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.
A private survey showed Wednesday that U.S. businesses increased hiring in January compared with a revised December reading. Payroll processor ADP said Wednesday that employers added 192,000 jobs in January.Stocks stayed lower immediately after the Federal Reserve released its statement following the end of its two-day policy meeting. The central bank took no action following the meeting and is standing behind its aggressive steps to try to reduce unemployment. The Fed said growth "paused" in recent months and reaffirmed its commitment to boost a sluggish U.S. economy by keeping borrowing costs low for the foreseeable future. "They did exactly what they were supposed to do, that is not say anything that deviated from what everyone wanted to hear," said JJ Kinahan, chief derivatives strategist at TD Ameritrade. Investors will now turn their focus back on to company earnings and Friday's nonfarm employment report, Kinahan said. The yield on the 10-year Treasury note, which moves inversely to its price, climbed 2 basis points to 2.02 percent. Among other stocks making big moves Wednesday: â¿¿ Chesapeake Energy rose $1.43 to $20.40 after the company said late Tuesday that its embattled CEO Aubrey McClendon will leave the company this spring. â¿¿ Avery Dennison, a packing materials company, rose $2.16 to $38.30 after it posted fourth-quarter earnings that beat analysts' expectations and said it was selling two of its business units to CCL industries for $500 million. The company will use the proceeds of the sale to buy back stock and make additional pension contributions. â¿¿ Copano Energy, a natural energy company, rose $4.93 to $38.05 after the company said that it had agreed to be acquired by Kinder Morgan Energy Partners for about $3.2 billion in stock. â¿¿ MeadWestvaco, a packaging company, fell $1.38 to $31.55 after the company reported earnings that fell short of analysts' expectations.