U.S. Stocks Fall as Investor Eye Earnings, GDP Data

By Corrie Driebusch 

        Global stock markets were mixed Thursday as investors focused on the latest batch of corporate earnings and digested a weaker-than-expected first reading for second-quarter U.S. gross domestic product.
        European stocks rose slightly in recent trading, while U.S. stocks pulled back after data released Thursday indicated the U.S. economy has yet to fully rebound from a weak start to the year.
        The Dow Jones Industrial Average fell 83 points, or 0.5%, to 17668. The S&P 500 shed 10 points, or 0.5%, to 2098 and the Nasdaq Composite Index declined 25 points, or 0.5%, to 5087.
        On the other side of the Atlantic, the Stoxx Europe 600 rose 0.2%.
        U.S. stocks were dragged lower after the Commerce Department said Thursday that U.S. economic output in the second quarter expanded at an annual rate of 2.3%. Economists surveyed by The Wall Street Journal had expected the rate of growth to be 2.7%.
        The government also said in the first quarter GDP, or the broadest sum of goods and services produced across the economy, grew at a 0.6% rate, an upward revision from a previously reported 0.2% contraction.
        "The economy continues to grow, but we're not seeing the kind of growth everybody wants," said Brad McMillan, chief investment officer for Commonwealth Financial Network. Still, he said he believes moderate growth is good for stock investors, because it means the U.S. Federal Reserve will take its time to raise short-term interest rates.
        "You can certainly argue that growth is not 3% or 4% and that's terrible, but if we saw consistent 3% to 4% growth, we'd see the Fed tightening much faster than people are expecting," said Mr. McMillan.
        Because of this moderate, sustainable growth, the Fed will continue to employ stimulative monetary policy, he added. "The Fed is not going to take the punch bowl away, they're just going to be spiking it a little bit less," he said.
        Investor focus has returned to economic data after Wednesday's U.S. Federal Reserve policy statement, in which the central bank didn't give a clear signal on when it would raise interest rates.
        "The FOMC didn't produce a clear signal on when the first rate hike will be," said Craig Bishop, lead strategist of U.S. fixed-income strategies at RBC Wealth Management. "Between today's GDP number and the jobs numbers we get a week from tomorrow, that will be key to what the Fed does or doesn't do."
        Many investors had expected the Fed to raise interest rates as early as September but Wednesday's statement from the central bank flagged concerns that inflation remains too low.
        U.S. stocks rose Wednesday in response to the Fed statement, with both the S&P 500 and the Dow advancing 0.7%, and the Nasdaq Composite closing up 0.4%.
        In corporate news, earnings season continued to move individual stocks.
        Procter & Gamble Co.'s core earnings topped consensus views but guidance was underwhelming. Shares fell 3.3%.
        Facebook Inc. shares fell 2.7% after the social networking company posted a 39% increase in quarterly revenue but said expenses grew faster than revenue.
        Shares of Whole Foods Market Inc. tumbled 11% after the natural-foods grocer said sales growth slowed sharply last month
        In Europe, the earnings season was also in sharp focus.
        Shares in Royal Dutch Shell PLC rallied after the oil company reported a sharp fall in second-quarter profit and said it would cut 6,500 jobs, illustrating the strain that sustained low oil prices are putting on large producers.
        In Asia on Thursday, the Shanghai Composite closed down 2.2% after snapping a three-day losing streak on Wednesday, while the Nikkei Stock Average ended the session up 1.1%, helped by a weaker yen.
        Elsewhere in currency markets, the euro edged lower against the dollar to $1.091. In debt markets, the yield on the benchmark 10-year U.S. Treasury note was at 2.270% compared with 2.279% on Wednesday.
        In commodity markets, crude-oil futures fell 0.3% to $48.65 a barrel. Gold lost 0.8% to trade at $1,083.90 per ounce.
        Josie Cox contributed to this article.
        Write to Corrie Driebusch at corrie.driebusch@wsj.com
        (END) Dow Jones Newswires

        July 30, 2015 10:01 ET (14:01 GMT)

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