Robust GDP report lifts the market, but gains evaporate on the heels of rally earlier in the week.
October 30, 2003: 10:27 AM EST
NEW YORK (CNN/Money) - U.S. stock markets were flat Thursday morning, as investors sold into early gains inspired by news that the economy had its strongest pace of growth in nearly two decades in the third quarter.
After one hour of trading, the Dow Jones industrial average (down 14.44 to 9760.09, Charts), the Nasdaq composite (down 4.53 to 1932.03, Charts) and the Standard & Poor's 500 (down 4.02 to 1044.09, Charts) index all traded a few points below breakeven. The major indexes had spent the first 30 minutes of trading in solidly positive territory.
Gross domestic product, the broadest measure of economic activity, grew at a 7.2 percent annual rate in the quarter, more than double the 3.3 percent annual rate in the second quarter, the government said. Economists were expecting growth of 6 percent, according to Briefing.com. Consumer spending led the way, jumping to a 6.6 percent growth rate from a 3.8 percent rate last quarter.
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Separately, the weekly jobless claims report showed that the number of Americans filing new claims for unemployment last week dipped fractionally, remaining below 400,000, a barometer that can indicate a weak labor market.
Consumer spending and stability in the labor market were two of the positives highlighted by the Federal Reserve's statement earlier in the week, in which the central bank acknowledged the strengthening economy, but said that the risk of inflation becoming too low remained. The Fed kept the fed funds rate steady at 1 percent, a 42-year low, and implied it would hold it there for some time.
Stocks have rallied for many months on bets that third- and fourth-quarter corporate earnings would show growth, and that the economic recovery would speed up. With the period of reporting quarterly earnings nearly over with and the bulk of earnings coming in stronger than expected, the market has stalled lately. But analysts say strong economic indicators, like Thursday's GDP could get stocks moving again.
Even with all the economic reports, investors still paid attention to individual companies' performance in the third quarter. A profit that fell well below expectations led to a nearly 4 percent selloff in the stock of Dow member Exxon Mobil (XOM: down $1.37 to $36.44, Research, Estimates).
Market breadth was positive, though by a narrow margin on the New York Stock Exchange, where 224 million shares changed hands. On the Nasdaq, advancing and declining stocks were almost equal in number on volume of 406 million shares.
The strong GDP report sent Treasury prices lower and the yield on the 10-year note up to 4.35 percent from 4.29 percent late Wednesday. The dollar weakened against the yen and euro.
NYMEX light sweet crude oil futures fell 31 cents to $28.60 a barrel.
Asian stocks ended mixed Thursday. European markets were higher in afternoon trading there.
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