Stocks turn mixed after latest GDP reading
NEW YORK — Stocks were trading in a narrow range early Friday as a new report showed the nation’s economy continued to shrink, but at a smaller pace than expected.
European markets were modestly lower as well after Asian markets posted big gains overnight.
The government said the U.S. economy slowed at a rate of 1 percent during the quarter, better than the 1.5 percent decline expected by analysts.
The data, however, also showed consumers cut their spending in the second quarter, a troubling sign as consumer spending accounts for more than two-thirds of all economic activity.
“Investors have been trying to trade on any bit of good news, but it’s not good,” Steven Stahler, president of the Stahler Group in Baton Rouge, La. said of the report.
The report is the strongest sign yet that the ongoing recession is winding down, but still ongoing. The measure, known as gross domestic product, is considered the best barometer of the nation’s economy.
However, the Commerce Department revised the first-quarter GDP figure much lower, saying economic activity tumbled 6.4 percent. That is the worst quarterly reading in nearly 30 years.
The latest report also said consumers cut spending by 1.2 percent in the second quarter, after a 0.6 percent increase in the first quarter.
Investors have been looking to consumers to help lead the economy out of a recession. Spending has been cut as consumers continue to worry about jobs. The unemployment rate is expected to move higher after hitting a 26-year high of 9.5 percent in June.
“We’re still not in very good shape in the employment part,” Stahler said, adding he doesn’t expect to see consumers leading the country of out recession soon.
In early morning trading, the Dow Jones industrial average rose 24.71, or 0.3 percent, to 9,179.17. The Standard & Poor’s 500 index rose 1.83, or 0.2 percent, to 988.58, while the Nasdaq composite rose 4.83, or 0.2 percent, to 1,989.13.
The report has given investors pause after they restarted a two-week rally on Thursday after welcoming a batch of stronger-than-expected earnings reports. Thursday’s gains pushed all the major indexes to their highest closes since last fall.
Earnings reports Thursday showed companies are still struggling amid the recession, but the problems aren’t as deep as investors were expecting heading into earnings season. The market was also boosted by a surprise drop in the number of people continuing to seek unemployment benefits.
The Dow rose to its highest level in nearly nine months with a gain of 84 points and the Nasdaq traded above 2,000 for the first time since October.
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