Stocks mostly flat on economic data
Technology shares rallied Thursday on better-than-forecast earnings, but the broader market finished mostly flat after a report of weak economic growth muted excitement over a new spate of acquisitions.
The Commerce Department’s latest estimate of first-quarter growth was 0.6%, lower than both the 0.8% expected on average by economists and the 1.3% projected by the government in April.
The apparent disconnect between the economy’s sluggishness in the first three months of the year and the Dow Jones industrial average’s surge of more than 9% this year made some investors pause.
“There’s friction between those two numbers. That’s why investors are a little bit worried, and why we’re not hitting home runs every day,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.
Still, most analysts on Wall Street expect growth to pick up this year. They also remain optimistic about the stock market thanks to the unrelenting wave of takeovers, which are on track to beat last year’s record tab of $4 trillion.
The Dow Jones industrial average edged down 5.44 points to 13,627.64 after reaching a new trading high of 13,673.07. On Wednesday, the Dow rose more than 111 points and set a new closing high of 13,633.08.
The Standard & Poor’s 500 index inched up 0.39 of a point to 1,530.62 after soaring to a record close Wednesday for the first time since March 2000.
The technology-dominated Nasdaq composite index showed more pronounced movement, rising 11.93 points, or 0.5%, to 2,604.52.
The Russell 2,000 index of smaller-company stocks rose 3.83 points, or 0.5%, to 847.18, its second straight record close.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
May proved to be a strong month for the major indexes. The Dow industrials rose 4.3%, giving the blue chips a year-to-date gain of 9.3%. The S&P; 500 climbed 3.3% in May and is up 7.9% for the year. The Nasdaq added 3.2%, putting its year-to-date gain at 7.8%.
Although GDP growth was slower than anticipated, jobs and the manufacturing sector looked strong. The Labor Department reported Thursday that the number of U.S. workers filing jobless claims dropped last week for the sixth time in seven weeks, and a Chicago manufacturing index rose sharply.
“Overall, the economic news was rather benign. What people are responding to are the market’s own internal dynamics -- gravity,” said Alfred E. Goldman, chief market strategist at A.G. Edwards.
Bond yields rose in the wake of the strong manufacturing data. The yield on the benchmark 10-year Treasury note climbed to 4.89% from 4.87% late Wednesday.
The dollar was mixed against other major currencies, while gold prices rallied.
Crude oil futures rose 52 cents to $64.01 a barrel in New York after the government reported a surprise drop in oil stockpiles.
In takeover news, banking giant Wachovia said it would acquire A.G. Edwards for $6.8 billion in cash and stock to form the second-largest retail stock brokerage in the country. A.G. Edwards shares soared $11.01, or 14%, to $88.16. Wachovia slipped 36 cents to $54.19.
The pact drove up shares of other regional brokerages, including Stifel Financial, which surged $4.47, or 8%, to $60.21, and Raymond James, which gained $2.26, or 7.3%, to $33.31.
Payroll processor Ceridian said late Wednesday that it was being acquired by investment firm Thomas H. Lee Partners and insurance provider Fidelity National Financial for about $5.3 billion. Ceridian jumped $1.18, or 3.5%, to $35.37. Fidelity National rose 47 cents, or 1.7%, to $28.04.
In other market highlights:
* Sears Holdings reported a solid 20% gain in profit from the latest quarter but said its U.S. store sales dropped. The stock fell $3.23, or 1.8%, to $180.02.
* Payless ShoeSource hit an all-time high after it reported a rise in fiscal first-quarter profit and better sales than analysts had expected. Payless rose $1.01, or 2.9%, to $35.72.
* Among Southland issues, Carpinteria, Calif.-based CKE Restaurants rose $1 to $21.79, an eight-year high, even though the parent of Carl’s Jr. and Hardee’s on Wednesday reported only a modest increase in fiscal fourth-quarter same-store sales.
Computer Sciences slid $1.28, or 2.3%, to $55.40. The El Segundo-based computer services firm said Wednesday that it would restate six years of results to correct tax accounting errors.
* Apple climbed $2.42, or 2%, to a record $121.19 after the company announced developments about its online products and Lehman Bros. made positive comments about the stock. Apple is up 43% this year.
* Chinese stocks rebounded Thursday after a sharp drop a day earlier. A key Shanghai index rose 1.4%.
Elsewhere overseas, key stock indexes surged 1.6% in Japan, 1.5% in Germany and 1% in France. British shares rose 0.3%.
