Nasdaq up 0.3% after GDP news; Dow, S&P 500 flat
Stocks cut early losses Thursday, with the Nasdaq climbing and the Dow and S&P 500 finishing flat as investors digested a batch of mixed corporate earnings and a report of slightly lower than expected but decent economic growth.
Getting a 0.3% boost on the day was the Nasdaq, up 17 points to 5128.79.
The Dow Jones industrial average finished basically flat — down a mere 0.03%, about 5 points, to 17,745.98 — after being down as much as 110 points.Also virtually flat was the S&P 500, up less than one-tenth of a point to 2108.63.
Blue chips comprising the Dow had strung together two straight sessions of triple-digit point gains following a five session losing streak, which was its worst skid since January.
The latest reading that the nation's economy grew at a 2.3% pace in the second quarter fell short of the 2.5% estimate economists surveyed by Bloomberg expected.
The report on gross domestic product showed a rebound from the 0.6% growth in the first quarter, revised up from a previous estimate of a contraction of 0.2%.
Wall Street was looking for a stronger economic rebound, as that would likely result in stronger corporate earnings. And with the stock market current valuation above its long-term average, better earnings is what it will likely take to propel the U.S. stock market higher.
Dow component Procter & Gamble (PG) was the leading loser after the blue-chip company gave less-than-robust forward guidance.
The consumer products maker reported adjusted earnings per share of $1, topping the 95 cents forecast. But in what is becoming a trend in the second quarter earnings season, the earnings per share beat was not coupled with a beat on sales and revenue. P&G fell shy on revenue. Also hurting shares were a tepid forecast for its new fiscal year. P&G shares were down more than 3%.
The broad market is also being weighed down by Facebook (FB), which reported earnings results after the closing bell Wednesday. The social media giant beat on earnings, revenue and user growth, but its expenses jumped sharply, souring Wall Street on its shares despite good results. Facebook shares tumbled 2.7%.
In the bigger earnings picture, the second-quarter earnings season has been solid, with earnings “beats” well above the long-term average and the estimate for final profit growth ticking back into the black earlier this week, after expectations of a 3% contraction back on July 1. Earnings are now seen rising 0.8% in the second quarter and that number could rise if more companies post good results.
Wall Street is still keeping an eye on mainland China’s volatile stock market. Overnight, the hard-hit Shanghai composite index fell 83.40 points, or 2.2%, to 3705.77. The stock index made news Monday when it tumbled 8.5%, its biggest one-day loss in eight years. After a brief 3%-plus bounce back Wednesday, the index remains under pressure and deep in bear market territory, after losing about one-third of its value since its June peak.
“China was in the red last night … as big selling at the end of the day hit the Shanghai composite,” Paul Hickey, co-founder of Bespoke Investment, noted in a client report before the opening bell.
Stocks in Europe, however, were trading in the green. The FTSE 100 in London was up 0.6%, the German DAX was 0.6% higher and the CAC 40 in France was up 0.4%.
Oil prices were also firmer. UWest Texas Intermediate crude was up 20 cents, or 0.4%, to $48.99. Oil, of course, is still under pressure from oversupply and slowing demand around the globe.