By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Altera gains on potential Intel deal news
U.S. stocks traded lower on Friday following a report showing
the economy contracted during the first quarter for the second
straight year.
The second estimate of gross domestic product showed the economy
shrank at an 0.7% annual pace during the first three months of the
year versus a 0.2% growth estimated previously.
The main indexes were on track to finish the week modestly
lower, but set to end the month with gains.
The S&P 500 (SPX) fell 10 points, or 0.5%, lower at 2116.
The Dow Jones Industrial Average (DJI) dropped 87 points, or 0.5%,
to 18,073. The Nasdaq Composite (RIXF) was off by 21 points, or
0.5%, at 5091.
Michael Arone, chief investment strategist at State Street
Global Advisors U.S. business, said while the revision was better
than expected, he is still looking for signs that the weakness was
transitory and weather related.
"While we did pay attention to the drop in earnings in the
report, that can be explained by the stronger dollar, which hurt a
lot of multinational companies and the drop in oil prices that hurt
energy firms. As the dollar and oil stabilized, we expect to see
higher profits that will drive prices in the near term," Arone
said.
Jeff Weniger, investment strategist and portfolio manager at BMO
Global Asset Management, noted that the market hasn't made a
material advance to new highs since the end of last year.
"We think the market is a lot nearer the top, given where the
valuations metrics are. There are very few real value stocks in the
U.S. at the moment. We have cut our position in U.S. stocks to net
underweight from net overweight and favor emerging markets and
other developed markets. Lon U.S. stocks and the dollar trade is
overcrowded," Weniger said.
European stocks
(http://www.marketwatch.com/story/european-stocks-drop-as-greece-worries-persist-but-stocks-looking-at-monthly-win-2015-05-29)
closed lower as a deadline approached for Greece to make the first
of debt repayments to the International Monetary Fund in the space
of two weeks.
Read: Fatal flaw in GDP? Investors latch onto new tool to track
economy
(http://www.marketwatch.com/story/new-tool-to-track-gdp-may-cause-as-much-problems-as-it-solves-2015-05-27)
(http://www.marketwatch.com/story/new-tool-to-track-gdp-may-cause-as-much-problems-as-it-solves-2015-05-27)Wouter
Sturkenboom, senior investment strategist at Russell Investments in
London, said Wall Street is definitely weary of trying to guess
when the Federal Reserve will hike interest rates.
"We are now in this weird zone where people wonder if good news
is bad news, or simply good news after all. It looks like it will
be difficult for U.S. stocks to break out of its current trading
range," said Sturkenboom in emailed comments.
In a negative sign for an economy that contracted in the first
quarter, data released Friday showed that consumer sentiment
dropped in May to a six-month low.
Separately, the Chicago PMI plunged in May to a reading of 46.2
from 52.3 in April.
Weniger said that the labor market is a lagging indicator and
the economy looks as though it reached its cycle peak.
Read: Fatal flaw in GDP? Investors latch onto new tool to track
economy
(http://www.marketwatch.com/story/new-tool-to-track-gdp-may-cause-as-much-problems-as-it-solves-2015-05-27)
(http://www.marketwatch.com/story/new-tool-to-track-gdp-may-cause-as-much-problems-as-it-solves-2015-05-27)Stocks
to watch: Shares of chip maker Altera Corp.(ALTR)(ALTR) rose 4.2%
after the New York Post reported Intel Corp.(INTC) is nearing a
deal
(http://www.marketwatch.com/story/intel-in-talks-to-buy-altera-for-15-billion-report-2015-05-29)
to buy its smaller rival. Intel shares rose 1.1%.
Shares of Google Inc.(GOOG) fell even as the company unveiled
Android Pay
(http://www.marketwatch.com/story/google-switches-up-mobile-payments-with-android-pay-2015-05-28),
a new mobile payment service that is expected to compete directly
with Apple Inc.'s(AAPL) Apple Pay.
For more on today's notable movers read Movers & Shakers
column
(http://www.marketwatch.com/story/amazon-google-gamestop-in-focus-2015-05-29).
Other markets: In Asia, the Shanghai Composite finished with a
slight loss on Friday, after a 6.5% plunge Thursday.
The dollar
(http://www.marketwatch.com/story/dollar-lower-against-yen-on-profit-taking-2015-05-29-2103228)(USDJPY)
strengthened against the yen, last changing hands around 124.08
yen.
Also read: Here's what's driving the dollar-yen trade
(http://www.marketwatch.com/story/heres-whats-driving-the-dollar-yen-trade-2015-05-28)
Oil prices
(http://www.marketwatch.com/story/oil-extends-gains-investors-eye-next-weeks-opec-meeting-2015-05-29-2103236)(CLN5)
rallied, gaining 4.5% to settle $60.30, helped by drops in crude
supplies and rig counts. The commodity gained 1% over the
month.
Gold prices
(http://www.marketwatch.com/story/gold-erases-loss-after-gdp-data-2015-05-29)(GCN5)
settled slightly higher at $1,189.80, posting the first monthly
gain since January.
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