Mixed reports on the economy point to a tame Fed and drive modest gains on Wall Street.
June 25, 2004: 10:33 AM EDT
NEW YORK (CNN/Money) - U.S. stock markets inched higher Friday morning after the day's economic reports reassured investors that the Fed can take its time when raising interest rates.
Declines in the price of oil helped underpin the gains as well.
Some 50 minutes into the trading session, the Dow Jones industrial average (up 38.20 to 10,482.01, Charts), the Standard & Poor's 500 (up 4.64 to 1,145.29, Charts) index and the Nasdaq composite (up 16.48 to 2,032.05, Charts) all traded a few points above unchanged.
Gross domestic product (GDP) in the first quarter actually grew at a 3.9 percent annual rate, versus an initial read of 4.4 percent. Economists surveyed by Briefing.com expected GDP would show no change from the preliminary read. GDP grew at a 4.1 percent annual rate in the fourth quarter of 2003.
The slower growth of the economy would seem to confirm that the Federal Reserve can indeed raise interest rates at a measured pace, a comforting prospect for investors.
However, the core price index component of the report showed a rise to 2.0 from 1.7 last month, implying inflation is on the rise.
Unclear whether to focus on slower growth or higher inflation, stock investors took a muted response and opted to extend the recent bout of rangebound trading that has stalled markets for some time.
In the meantime, two other reports on the economy helped put a cap on Wall Street's advance. The University of Michigan's consumer sentiment index came in at 95.6 in its final reading for June, against May's final reading of 90.2. And existing home sales surged by 2.6 percent in May to a seasonally adjusted annual rate of 6.8 million, according to the National Association of Realtors, above April's level of 6.63 million.
The stock market this week has been choppy and circuitous as investors look to next week's Fed policy-setting meeting June 29-30. The central bank is widely expected to boost the fed funds rate by 25 basis points. While analysts say that this is already baked into the market, there is some investor worry about the Fed's statement and what it might say about future rate hikes.
Also due next week: the transfer of power in Iraq from a temporary council to a transitional government, and the June payrolls report.
Ahead of all this, investors stuck to caution, which has been the dominant trend on Wall Street for the past few weeks.
Among early movers, shares of Nike (NKE: up $2.24 to $74.64, Research, Estimates) gained more than 3 percent after the company posted earnings late Thursday that grew from a year earlier and surpassed analysts' expectations.
Market breadth was positive, however trading volume was very light. On the New York Stock Exchange, where 260 million shares changed hands, advancers outnumbered decliners by three to two. The gainer/loser ratio was the same on the Nasdaq, where 346 million shares changed hands.
Treasury prices dipped, pushing the 10-year note yield up to 4.66 percent from 4.64 percent. The dollar rose versus the euro and yen.
NYMEX light sweet crude oil futures fell 57 cents to $37.36 per barrel, after the Norwegian government demanded oil workers end their strike. COMEX gold fell $1.50 to $402 an ounce.
In international trading, Asian markets closed modestly higher Friday, while European markets fell in the afternoon there.
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