Dominating the session was a report by the Commerce Department on gross domestic product, or GDP, which advanced at a 1.1% seasonally adjusted annual rate during the April-June second quarter. That's a steep decline from the revised 5% rate of increase in the first quarter, which previously was reported as a more robust 6.1% gain.
Also dragging on stocks was a sharp drop in the Chicago purchasing managers' index, or PMI, for July. The widely followed gauge of conditions in manufacturing tumbled to 51.5 on the month from 58.2 in June, a much deeper than expected correction compared to the economists' median forecast of 56.8.
Among the stocks in the news, AOL Time Warner (AOL
) confirmed earlier news reports that the U.S. Department of Justice has begun an inquiry into accounting practices at its America Online division and that it will cooperate fully. Shares of AOL Time Warner closed down roughly one point at $11. That's down some 75% since its last 52-week high of $47 in August, 2001.
In other corporate news, the largest U.S. local phone provider, Verizon (VZ
), reported that it met second quarter earnings expectations. However, the company also lowered both its earnings and revenue outlooks for the rest of the year.
General Electric (GE
) said CEO Jeffrey Immelt had signed off and certified the company's financials ahead of the SEC's Aug. 14 deadline. The company also said it will expense executive stock option plans.
And late Tuesday, computer services and hardware giant IBM Corp. (IBM
) made its largest acquisition ever, saying it would buy PricewaterhouseCoopers Consulting for $3.5 billion in cash and stock. Big Blue also said PwC would no longer pursue its planned initial public offering.
The Dow Jones industrial average added 56.56 points, or 0.65%, to 8,736.59. The tech-heavy Nasdaq composite index slipped 16 points, or 1.19%, to 1,328.19. And the broader Standard & Poor's 500-stock index was up 8.83 points, or 0.98%, to 911.62.
U.S. Treasuries ended higher in price following the release of the weaker-than-expected GDP and Chicago PMI figures.
In other economic news, the Federal Reserve said the U.S. economy grew modestly in recent weeks but the job market showed relatively little improvement, underscoring the recovery's sluggishness, according to news reports. The comments were part of the Fed's "Beige Book" report, an anecdotal summary of economic conditions across the central bank's 12 regions.
Meanwhile, prices of Fed funds futures, a trading vehicle for market pros to bet on future interest rate moves, were also higher in the wake of the disappointing economic data releases. Though the futures suggest about 30% chance of an easing by the Federal Reserve, according to S&P, most Fed watchers see that as a very unlikely scenario.
European markets closed mixed. In London, the Financial Times-Stock Exchange 100 index gained 65.30 points, or 1.56%, to 4,246.20. In France, the CAC 40 was up 35.53 points, or 1.05%, to 3,415.38. And in Germany, the DAX Index fell 178.80 points, or 4.61%, to 3,700.14.
In Asia, the markets finished on a mixed note. The Nikkei lost 125.78 points, or 1.26%, to 9,877.94, on short-term profit-taking and amid uncertainty over the global equity markets including the U.S. Exporter shares led the fall as the yen edged higher against the U.S. dollar. In Hong Kong, the market added 112.11 points, or 1.10%, to 10,267.36.