A weaker gross domestic product figure and a flurry of late-day trading left stocks widely mixed Friday, with tech issues and small caps gaining as blue chips suffered. The major indexes all finished the week lower.
The GDP grew at a 3.9 percent annual rate in the first quarter — a strong pace, but less than Wall Street expected. Investors put a mixed spin on the news — some believed the lower figure would mean less inflation and moderate interest rates, while others questioned the strength of the economic recovery.
However, most investors agreed that the GDP figure would prevent the Federal Reserve from raising rates aggressively at its meeting next week. Wall Street is expecting a 0.25 percent rate hike from the two-day meeting that starts Tuesday.
“I think at this point, a half-point raise is off the table,” said Daniel Portanova, managing director at Gartmore Separate Accounts in Irvington, N.Y. “And I think the market will be comfortable with a quarter-point rate hike, especially after seeing this number.”
The market suffered some volatility in the last hour of trading as institutional investors adjusted their portfolios to reflect the annual rebalancing of the Russell indexes.
At the close, the Dow Jones industrial average was down 71.97 points, or 0.7 percent, at 10,371.84.
Broader stock indices were mixed. The Standard & Poor’s 500-stock index was down 6.22 points, or 0.6 percent, at 1,134.43, but the Nasdaq composite index was up 9.90 points, or 0.5 percent, at 2,025.47. The Nasdaq is home to many small cap stocks, which are measured by the Russell 2000 index. The Russell 2000 was up 8.65 points, or 1.5 percent, at 587.70.
For the week, the Dow lost 0.4 percent and the S&P 500 dropped 0.1 percent, while the Nasdaq gained 2 percent. The Dow reversed a four-week run of gains and the S&P 500 had its second consecutive losing week. The Nasdaq reversed last week’s decline.
The Commerce Department’s GDP figure, which measures the value of all goods and services produced in the nation, was less than the 4.4 percent economists expected. The lower figure was blamed on a spiraling trade deficit as well as a moderation in consumer spending.
Spending on previously owned homes was not moderate, however. The National Association of Realtors reported sales of existing homes climbed to a record annual rate of 6.8 million homes in May, up 2.6 percent from April.
Despite the new data, however, volume remained low as investors looked to the Fed meeting and the handover of power in Iraq next week before making any large moves on the markets.
“You’ve got a Friday in the summertime, which normally means low volume anyway, and you have these major events next week,” said Jay Suskind, head trader at Ryan Beck & Co. “Everybody’s sensing after these big events, if all goes according to plan maybe we move into a summer rally mode. So it’s a kind of wait and see.”
In corporate news, Lockheed Martin Corp.’s deal to acquire Titan Corp. for $1.66 billion was poised to fall through as Titan said it was unlikely to resolve a federal investigation into charges of overseas bribery by Friday, as outlined in the acquisition agreement. Lockheed said it would not extend Titan’s deadline. Lockheed was down 14 cents at $51.97, while Titan dropped $4.07, or 22 percent, to $14.53.
Clothing and sporting goods manufacturer Nike Inc. jumped $2.91 to $75.31 after posting a 21 percent rise in quarterly profits and handily beating Wall Street earnings expectations by 5 cents.
Countrywide Financial Corp. fell 21 cents to $71.09 after the company board approved a 2-for-1 stock split, to be paid in the form of a stock dividend.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 1.79 billion shares, compared with 1.40 billion on Thursday.
Overseas, Japan’s Nikkei average rose 0.3 percent. In Europe, Britain’s FTSE 100 slipped 0.2 percent for the session, France’s CAC-40 closed 0.4 percent lower and Germany’s DAX gained 0.2 percent.