Posted on Wednesday, December 22, 2010
NEW YORK—U.S. stocks wavered after U.S. third-quarter economic growth missed economists' estimates while existing-home sales for November rose less than expected, although home prices showed signs of stabilization.
The Dow Jones Industrial Average edged up 3 points to 11535, drifting in and out of the red a day after the measure reached its highest point in more than two years. The measure's financial components led its gains, with Bank of America up 2.1% and J.P. Morgan Chase up 2.2%, as bank stocks continued to benefit from improved sentiment following several deals announced in the sector in recent weeks.
Keeping the gains in check, Intel fell 0.8%, while 3M shed 0.7% and Wal-Mart Stores declined 0.5%.
The Nasdaq Composite rose 0.1% to 2670 and earlier in the session reached a three-year intraday high at 2672.10. The Standard & Poor's 500 index advanced 0.2% to 1257 and hit a two-year intraday high at 1257.18.
Gross domestic product, the value of all goods and services produced, rose at a seasonally and inflation-adjusted annual rate of 2.6% in July through September, the Commerce Department said. In the government's previous report, released a month ago, GDP was estimated to have increased by 2.5% in the third quarter.
But Wednesday's number, the third and final one made by the government for the July-through-September period, missed economists' expectations for GDP to have risen by a higher 2.9%. The main revisions were to consumer spending, which rose by less than previously estimated, and to company inventories, which increased by more than previously thought.
Still, Jim McDonald, chief investment strategist at Northern Trust Global Investments, said the GDP revision was largely a "non-event."
He said that while the inventory change bears watching, "the revision lower of consumer spending to me is old news because we're seeing real-time today that consumers have increased confidence." He noted that retailers' holiday sales appear to be "really strong."
Separate data showed demand for used homes increased by 5.6% to a seasonally adjusted annual rate of 4.68 million, the National Association of Realtors said Wednesday. Economists had expected home sales in November to increase by 6.5%, to an annual rate of 4.72 million.
The price for an existing home edged up for the first time since August, to $170,600 in November. That's up 0.4% from the year-ago median price of $170,000 and an improvement from a downwardly revised $170,400 in October.
Data on November existing home sales will be released after the market opens at 10 a.m.
The euro slipped to $1.3084, from $1.3096 late Tuesday, as the market digested rumors that China may be prepared to buy €4 billion to €5 billion ($5.24 billion to $6.55 billion) of Portuguese debt. The reports come a day after Moody's Investors Service warned it may lower Portugal's credit rating as much as two notches, dealing another blow to investor confidence in the euro zone.
The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, was flat. Treasurys were lower, lifting the yield on the 10-year note up to 3.32%. Gold futures slipped.
Crude-oil futures climbed above $90 a barrel after the American Petroleum Institute, an industry group, Tuesday reported a big drop of 5.8 million barrels in U.S. crude stocks for last week.
Among stocks in focus, Walgreen jumped 7.6% after the drugstore operator posted a 19% increase in fiscal first-quarter earnings, with Chief Executive Greg Wasson citing cost controls and a slowing of new-store openings. The company posted higher prescription sales and said the front of the store saw "significant increases" due to improved merchandising.
Nike shed 5.7%. Emerging middle-class consumers in countries from China to Brazil helped propel a 22% increase in the company's fiscal second-quarter earnings. But investors were concerned by a warning that for the next three or four quarters, Nike expects higher costs for labor, cotton and transportation.
WSJBy DONNA KARDOS YESALAVICH