Stocks Inch Higher after GDP Revision
Stocks finished modestly higher in slow trading Wednesday, with key economic releases due over the next two sessions. Investors were digesting a smaller-than-expected upward revision to second-quarter gross domestic product (GDP).
The Dow Jones industrial average gained 12.97 points, or 0.11%, to 11,382.91. The broader Standard & Poor's 500 edged down 0.01 points, or less than 0.01%, to 1,304.27. The tech-heavy Nasdaq composite rose 13.43 points, or 0.62%, to 2,185.73.
NYSE breadth was decidedly positive, with 21 issues advancing for every 12 declining. Nasdaq breadth was 18-12 positive.
From a technical perspective, some analysts indicate cautious optimism. "We expect the broader markets test their previous highs," says Mary Ann Bartels, chief U.S. market analyst at Merrill Lynch. "While this 'summer rally' may set new bull market benchmarks for the senior averages, the potential for a decline in excess of 20% remains high."
A report on economic growth was in the spotlight Wednesday. The preliminary reading on second-quarter GDP growth was revised to 2.9% from the advance report's 2.5% pace, just below expectations.
Upward revisions to employee compensation should push up first- and second-quarter labor costs, analysts say. "The revision deals with the near-term history of the report, but keeps us concerned about fundamental inflation pressures, especially as the history of unit labor costs has already been significantly revised upward," says Lehman Brothers economist John Shin.
Elsewhere on the economic calendar, the ADP employment report showed private payrolls rose 107,000 in August, a little less than expected, ahead of Friday's closely watched jobs figures. Separately, Dallas Federal Reserve President Richard Fisher delivered a speech similar to his remarks Tuesday, noting that the Fed was watching for the delayed impact of past interest-rate hikes on inflation.
In corporate news, Costco (COST) was lower after the wholesale club operator cut its annual profit forecast amid increasing competition and rising gasoline prices.
Shares of Altria (MO) rose as a Bank of American analyst said the company may spin off its Kraft (KFT) packaged-food division. Shares of Altria rose at the outset after cigarette makers won dismissal of a suit seeking billions of dollars in Medicare expenses for the treatment of smoking-related diseases.
Drugmaker Merck (MRK) was modestly lower after rising in afternoon trading when a federal judge overturned a jury's recent $50 million award against the company in lawsuit involving its Vioxx painkiller.
Network software maker Novell (NOVL) was down after the company reported a jump in fiscal third-quarter profit but said it has launched an internal investigation into past stock-options grants.
Internet search giant Google (GOOG) was slightly higher as CEO Eric Schmidt was elected to Apple's (AAPL) board of directors, in a move that reportedly aligns the two companies in a rivalry with Microsoft (MSFT).
In analyst calls, Prudential downgraded Lockheed Martin (LMT) from neutral to underweight, while Friedman Billings Ramsey upgraded aerospace rival Northrop Grumman (NOC) from underperform to market perform.
In the energy markets, October West Texas Intermediate crude oil futures closed up 32 cents at $70.03 a barrel, rebounding from early lows amid short-covering, despite an unexpected jump in oil supplies.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 41 points, or 0.7%, to 5,929.3. Germany's DAX index added 20.51 points, or 0.35%, to 5,867.53. In Paris, the CAC 40 index was up 22.47 points, or 0.44%, to 5,182.79.
Asian markets ended mixed. Japan's Nikkei 225 index slipped 18.54 points, or 0.12%, to 15,872.02. In Hong Kong, the Hang Seng index gained 201.43 points, or 1.18%, to 17,284.71. Korea's Kospi index declined 3.26 points, or 0.24%, to 1,341.35.
Treasury yields ticked lower after the modest upward revision in GDP. The 10-year note rose slightly in price 100-28/32 for a yield of 4.76%, while the 30-year gained to 93-22/32 for a yield of 4.91%.