The Dow Jones industrial average fell 128.43 points, or 1.26%, to 10,070.37. The broader Standard & Poor's 500 index was down 13.16 points, or 1.14%, to 1,143.22. The Nasdaq composite index lost 26.25 points, or 1.36%, to 1,904.18.
After a drop below $50 per barrel Thursday morning, crude oil reversed course to close up 16 cents at $51.77, exacerbating stock market weakness.
There are a few economic reports coming out Friday. The University of Michigan's final April consumer sentiment index is expected to hold at the preliminary level of 88.9 from March's 92.6. Gas prices have moderated a bit from the highs hit near the early April survey, although continued profit-taking in the stock market and increased media attention surrounding an economic "soft patch" should limit any rebound, says Action Economics.
March personal income is expected to rise 0.4%, while consumption increases 0.4%. Following the release of first-quarter gross domestic product (GDP), the data will largely be used to set the pace for the second quarter.
Friday's release of the first-quarter employment cost index (ECI) is expected to rise 1.0%, which should correspond with a gain of 3.7% on the year. The wages and salaries component is expected to increase 0.7%, while benefit costs are expected to surge 2.0%, as beginning-of-year price hikes produce another big first-quarter gain on par with the last two years, says Action Economics. The data should support the view that the healthy economy and tighter labor market continue to put some upward pressure on compensation costs, though costs still remain contained on a historical basis and are mainly coming on the benefit side, notes the economic research outfit.
The Chicago purchasing managers' index is expected to drop to 62.5 in April from March's much stronger-than-expected level of 69.2. This value of this survey has diminished considerably over the last couple of quarters, as it has consistently diverged from the broader trend and monthly swings in both the national ISM and other related regional surveys, says Action Economics.
Companies on Friday's earnings calendar include Anadarko Petroleum (APC
), ChevronTexaco (CVX
), Cardinal Health (CAH
), and ITT Industries (ITT
In economic news Thursday, first-quarter
gross domestic product (GDP) grew at a 3.1% pace, following a 3.8% rate in the fourth quarter. This was below economists' median forecast for 3.5% growth and the lowest rate in two years.
In the report, consumption slowed to a 3.5% pace from 4.2% in the fourth quarter. Fixed investment growth was halved to up 5.0% from 10.5%. Business spending eased to a 4.7% pace from a robust 14.5% in the fourth quarter. Inventories grew by $80 billion, adding 1.2% to growth. Trade subtracted 1.5%, however. The GDP price deflator accelerated to 3.2% from 2.3% in the fourth quarter.
The report showed slowing business expansion alongside rising prices, which could rekindle fears of stagflation, says Standard & Poor's MarketScope.
Jobless claims rebounded 21,000 to 320,000 for the week ended Apr. 23, from a revised 299,000 the week before (296,000 previously reported). The 4-week moving average fell to 323,000 from 332,000.
Among stocks on the move, Exxon Mobil (XOM
) helped drag down the Dow average on disappointing results. The world's largest oil company said net income jumped to $1.22 per share, from 83 cents per share a year ago. Excluding a $460 million gain on the sale of Exxon's stake in China Petroleum and Chemical, the company earned $1.15 per share in the latest quarter. Analysts forecast the company to post higher operating earnings of $1.20 per share, according to news reports.
In other earnings news, Procter & Gamble (PG
) reported third-quarter earnings per share of 63 cents, vs. 55 cents a year ago, on a 10% sales rise. The consumer products giant sees fourth quarter EPS of 54 cents to 55 cents, and raised its fiscal year 2005 EPS guidance to $2.64-$2.65.
) reported second-quarter EPS of 24 cents, vs. 19 cents a year ago, on 22% revenue rise. The coffee chain raised its fiscal year 2005 EPS guidance to $1.17-$1.19.
Microchip Technology (MCHP
) shares rose after the chip maker posted EPS of 27 cents, vs. 22 cents a year ago, on an 8.6% sales rise. The company also sees a 5% sequential sales rise, and raised its quarterly dividend from 7 cents to 9.5 cents.
One of the big losers Thursday was Martek Biosciences (MATK
), which plunged nearly 46% after the maker of nutritional oils used as ingredients in infant formula and foods cut third-quarter revenue guidance and said it expects fiscal year 2005 earnings per share to be "materially" lower than current estimates.
After the close of trading Thursday, Microsoft (MSFT
) posted 23 cents, vs. 12 cents third-quarter earnings per share on $9.62 billion revenue. The software giant missed analysts' $9.83 billion revenue estimate.
Other companies on Thursday's earnings calendar included Nextel Communications (NXTL
), Gateway (GTW
), Aetna (AET
), Bristol-Myers Squibb (BMY
), Comcast (CMCSA
), Kellogg (K
), and Wendy's (WEN
Treasury prices rose, sending yields lower, on a flight to safety in the wake of the lower than expected first-quarter GDP report. The 10-year yield fell to a two-month low of 4.17% despite a higher price deflator in the GDP report.
Meanwhile, the U.S. dollar strengthened vs. other major currencies. Some of weakness in GDP was likely priced in after the poor March durable goods orders report on Wednesday, reports S&P MarketScope.
European stock markets were mixed on Thursday. London's Financial Times-Stock Exchange 100 index was up 0.8 point, or 0.02%, to 4,790.2 following a report showing Britain's house prices rose 0.9% in April, the most in five months, suggesting the slowdown seen since the second half of last year may be bottoming out. Allied Domecq was higher after Constellation Brands and 3 partners said they may make a bid to rival Pernod Ricard's $14 billion offer for the company. AstraZeneca was higher after the company said first-quarter profit increased 31%.
Germany's DAX index lost 10.92 points, or 0.26%, to 4,178.1 even though Germany's unemployment rate unexpectedly fell to 11.8% in April, thanks to a 79,000 reduction in the number of jobless. But the ILO-based definition of the unemployment rate edged up to 9.5% from 9.4% in February.
In Paris, the CAC 40 index fell 16.23 points, or 0.41%, to 3,911.45. Alcatel fell as the company said first-quarter profit fell 55% because it couldn't repeat a gain from the sale of its battery business. Euro Disney was higher after the company said its first-half fiscal loss narrowed from year ago.
Asian markets finished higher on Thursday. In Japan, the Nikkei 225 index edged up 3.48 points, or 0.03%, to close at 11,008.9. Sony fell 2.26% after the company's core electronics division reported losses in the past business year as a result of declining prices of DVD recorders, TVs, and video cameras. Further, the company hinted at difficulty to achieve a 10% target of group operating margin in 2006 and 2007.
In Hong Kong, the Hang Seng index rose 69.78 points, or 0.5%, to close at 13,909.42. Yanzhou Coal climbed 0.96% after the company reported a 102.3% year-over-year surge in first-quarter net profit.