Stocks Levitating Above Unchanged Mark In Mid-Afternoon Trading - U.S. Commentary

Stocks are just above the unchanged mark in mid-afternoon trading on Friday, as a mixed bag of economic reports has limited trading enthusiasm. The major averages are all in positive territory but are still on pace for a weekly loss.

The first salvo on the economic front today came from the Commerce Department, which reported that U.S. economic activity in the fourth quarter expanded by more than previously expected, with the upward revision partly due to a smaller than previously expected drop in inventories.

In a separate report, the Institute for Supply Management - Chicago said that its index of activity in the manufacturing sector increased unexpectedly. With the uptick, the index rose to its highest level since April of 2005.

On the other hand, consumer sentiment in February was slightly weaker than previously estimated, with the consumer sentiment index unexpectedly revised lower by Reuters and the University of Michigan.

Further, the National Association of Realtors released data showing that sales of previously owned homes dropped again in January, adding to the sharp decline seen in the final month of last year.

In earnings news, American International Group Inc. (AIG) reported a loss of $65.51 per share for the fourth-quarter and a loss of $53.23 per share on an adjusted basis. The stock is under pressure as the firm indicated that it might need additional government assistance as its debt liabilities mature.

After the markets closed for trading on Thursday, software solutions provider Novell Inc. (NOVL) reported a higher profit in its first quarter, helped by lower operating expenses. Earnings for the quarter were in line with estimates, but revenues fell short. Looking ahead to the second quarter, Novell expects revenues to be flat sequentially.

The major averages have moved roughly sideways in recent trading, holding onto modest gains. The Dow is currently up 15.42 points or 0.2 percent at 10,336.45, the Nasdaq is up 5.13 points or 0.2 percent at 2,239.35 and the S&P 500 is up 2.29 points or 0.2 percent at 1,105.22.

Dow Components

The Dow components are roughly split, contributing to the lack of conviction being shown by the blue chip index.

Financial giant JP Morgan Chase (JPM) is the leading percentage gainer in the Dow, posting a 3.4 percent gain. With the upward move, the stock is poised to end the session at its best closing price in just over one month's time.

Bank of America (BAC) is also seeing a strong outing, rising by 1.1 percent. The gain has shares of the firm on pace for a six-week closing high.

Merck (MRK), General Electric (GE) and Boeing (BA) are also advancing, while Kraft (KFT) is seeing the sharpest loss in the blue chip index, sliding by 1.4 percent. The decline has dragged the stock down to its lowest intraday price in nearly a month.

Disney (DIS), Procter & Gamble (PG) and McDonald's (MCD) are also moving lower, limiting the upside for the blue chip index.

Sector News

Airline stocks remain up by sizable margins in mid-afternoon trading, despite the day's inclement weather disrupting flight scheduling. The NYSE Arca Airline Index is up by 3.1 percent, on pace to set a two-year closing high.

Healthcare provider stocks are also seeing buying interest, with the Morgan Stanley Healthcare Provider Index up by 1.5 percent. Despite the gain, the index remains rangebound as it crawls back from recent losses.

Also on the upside, shares of Gibraltar Industries Inc. (ROCK) are bouncing off of a four month closing low with today's 5.4 percent advance, contributing to a modest 0.7 percent gain by the NYSE Arca steel Index.

Meanwhile, tobacco stocks continue to see notable weakness, with the NYSE Arca Tobacco Index down by 1.3 percent. The index is pulling back further off of the one-month closing high set earlier this week.

Railroad stocks are also under pressure, pulling the Dow Jones Railroads Index down by 0.8 percent. With the loss, the index poised to close at a seven and a half week low.

In Focus: Economic Data

As mentioned above, the Commerce Department revealed that the U.S. gross domestic product increased at an annual rate of 5.9 percent in the fourth quarter compared to the advance estimate of 5.7 percent growth. Economists had expected the pace of GDP growth to be unrevised.

Further, the Institute for Supply Management - Chicago said its business barometer index rose to 62.6 in February from 61.5 in January, with a reading above 50 indicating growth in the manufacturing sector. The increase came as a surprise to economists, who had expected the index to slip to 59.7.

On the other hand, Reuters and the University of Michigan reported that their consumer sentiment index was downwardly revised to a reading of 73.6 from the previous estimate of 73.7. Economists had been expecting the index to be revised up to a reading of 73.9. The index came in at 74.4 in January.

Additionally, the National Association of Realtors revealed that sales of previously owned homes fell 7.2 percent in January compared to the previous month. The figure came in at a seasonally adjusted annual rate of 5.05 million units - its lowest level in seven months.

While the month-to-month figure showed a decline, sales did rise from the same period in 2009. Compared to last year, January's figure represented an 11.5 percent improvement.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw a moderate rebound on Friday. Japan's benchmark Nikkei 225 Index rose by 0.2 percent, while Hong Kong's Hang Seng Index advanced by 1 percent.

The major European markets closed notably higher. The German DAX Index and the U.K.'s FTSE 100 Index gained 1.2 percent and 1.5 percent, respectively, while the French CAC 40 Index rose by 1.9 percent.

In the bond markets, treasuries are moderately higher following the day's deluge of economic data. Subsequently, the yield on the benchmark ten-year note is trading at 3.593 percent, seeing a loss of 4.9 basis points.

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