Economic Growth Report Pulls Dow Down 38

Stocks fell Friday after the government’s gross domestic product report cast more doubt on the pace of the economic recovery.

While the 4 percent annual growth rate in the fourth-quarter GDP shows an expanding economy, the number was lower than the 4.8 percent analysts expected. The figure was a slowdown from the third quarter’s 8.2 percent, but no one had expected that rate of growth to be sustained.

“The GDP reading clearly hasn’t been reacted to positively,” said Brian Bruce, director of global investments for PanAgora Asset Management Inc. “But it’s more a question of the reaction, since this wasn’t really bad news. People seem to be expecting such good news that pretty good news, but not really good news, gets reacted to too negatively.”

In early afternoon trading, the Dow Jones industrial average was down 37.78, or 0.4 percent, at 10,472.51.

Broader stock indicators were also lower. The Standard & Poor’s 500 index was down 3.13, or 0.3 percent, at 1,130.98, and the Nasdaq composite index was down 2.76, or 0.1 percent, at 2,065.47.

The GDP report provided another muddled sign on the economy, at least for investors already nervous about job growth and the Federal Reserve’s shift on interest rates this week.

“I think the 4 percent GDP number is a terrific performance,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “There’s still a lot of upside to this market, but there’s a fair amount of short-term investment money that’s pulling momentum to the sell side.”

That momentum pulled down shares that otherwise would be buoyed by positive earnings news. ChevronTexaco Corp. was down $1.12 to $86.19 despite reporting a 91 percent jump in fourth-quarter profits.

Wendy’s International Inc. fell 15 cents to $39.55 after reporting a 28 percent rise in profits, beating analysts’ expectations by 2 cents per share.

Struggling computer maker Gateway Inc. rose 37 cents to $4.46 after it met forecasts by posting an operating loss of 15 cents per share for the fourth quarter late Wednesday. The company also announced it would buy privately held eMachines Inc. for $235 million, creating the nation’s third-largest personal computer maker.

Telephone equipment maker Nortel Networks Corp. posted its first annual profit since 1997, sending shares $1.26 higher to $7.84.

General Motors Corp. fell $1.22 to $49.49 after Goldman Sachs cut its rating on the stock.

The Walt Disney Co. fell 38 cents to $24.07 after a distribution deal between the entertainment giant and Pixar film studios, maker of the popular films “Toy Story” and “Finding Nemo,” was not renewed. Pixar, now free to find other distributors, was up $2.98 to $67.18.

Declining issues barely outnumbered advancers on the New York Stock Exchange. Volume came to 851.82 million shares, compared to 1 billion at the same point Thursday.

The Russell 2000 index of smaller companies was down 0.10, or 0.02 percent, at 579.76.

Overseas, Japan’s Nikkei stock average was flat. Britain’s FTSE 100 closed down 0.5 percent, France’s CAC-40 finished 0.7 percent lower and Germany’s DAX index fell 0.9 percent in late trading.

—

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com