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Dow Jones Index falls on GDP data, another ratings agency downgrade

Saturday, January 28, 2012 by Proactive Investors

U.S. equity markets were lower Friday afternoon as investors digested a weaker-than-expected economic growth report with the eurozone debt situation still very much in the background.

As at 2.10pm EDT, the Dow Jones Industrial Average fell 68.04 points, or 0.5%, to 12,667.04, the S&P 500 declined 2.64 points, or 0.2%, at 1,315.79 and the NASDAQ was 8.51 points higher, or 0.3%, at 2,813.79.

Earlier Friday, US gross domestic product grew at a 2.8% annual rate in the fourth quarter of 2011 - below expectations. Reuters analysts expected the US economy to grow at a 3% rate.

Inventories increased $56.0 billion, contributing 1.94 percentage points to GDP growth in the fourth quarter. Excluding this, the US economy grew at just a 0.8% rate.

The results are in line with the Federal Reserve's decision Wednesday to keep ultra low interest rates on hold until late 2014, on expectations for soft growth and potential risks ahead, indicating the eurozone debt crisis could still take its toll.

Indeed, Fitch Ratings cut the credit ratings of Italy, Spain and three other eurozone countries later Friday, saying they lack financing flexibility in the face of the regional debt crisis.

Anxiety also continues to loom over Greece's ongoing negotiations with private-sector creditors in an attempt to reduce its debt burden. Without an agreement, the country jeopardizes its access to bailout funds and might not be able to make a 14 billion euro debt payment due March 20.

In corporate news, Ford (NYSE:F) posted 2011 profit of $20.2 billion US - its biggest since 1998 due to a one time tax gain. But for the fourth quarter, earnings missed forecasts.

Chevron (NYSE:CVX) reported a drop in its fourth quarter earnings on Friday, as rising oil prices could not offset the decline in its production and sales volumes.

Procter & Gamble Co.'s (NYSE:PG) fiscal second-quarter earnings plunged 49%, hit by higher materials costs and business write-downs as the consumer products giant lowered its full-year guidance.

Biotech giant Amgen (NASDAQ:AMGN) said fourth-quarter profits fell 8.5% as its expenses for taxes and for producing and selling drugs rose faster than revenue.

Data network equipment maker Juniper Networks (NASDAQ:JNPR) said fourth-quarter earnings fell 49% on weak router sales. The company posted earnings of $96.2 million, or 18 cents per share, down from $190.2 million, or 35 cents per share, a year earlier as revenue slipped 5.8% to $1.12 billion.

On the economic front, confidence among US consumers rose more than forecast in January to the highest level in almost a year, on signs of improvement in the job market.

The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 75 from 69.9 at the end of December.

Economists had been expecting a reading of 74, according to Bloomberg.

Commodities

On the NYMEX, crude futures edged up 4 cents to $99.74 a barrel while gold futures rose $2.50 to $1,729.20 an ounce.

Europe

European markets finished broadly lower today with shares in France leading the region. The CAC 40 was down 1.32% while Britain's FTSE 100 was off 1.07% and Germany's DAX fell lower by 0.43%.

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