US stocks regain ground

AP

US stock prices fluctuated on Friday after investors found some upbeat news in the government's assessment of the economy during the April-June quarter.

The Dow Jones industrial average, down almost 120 points in the first minutes of trading, recovered and was up three late in the morning. The other major indexes also wiped out their losses and were slightly higher.

Still, some traders were cautious and opted for the safety of Treasury bonds instead of riskier stocks. That helped push interest rates lower.

The Commerce Department said the gross domestic product, the broadest measure of the economy, grew at an annual pace of 2.4 per cent from April to June. That's less than the 2.5 per cent economists polled by Thomson Reuters had forecast.

At first the report confirmed investors' belief that the recovery is weakening as unemployment remains high and government stimulus programs end. Consumers cut back on their spending because of job worries and companies spent less to rebuild inventories.

But analysts said that as investors read deeper into the report, it didn't look as bad as they initially thought. They found some good news in consumers' savings rate.

"The consumer actually decided to save more," Jason Pride, director of investment strategy at Glenmeade, an investment management company. "Consumers have done more to repair their balance sheets than thought."

Pride said that means that those extra savings will eventually be spent, giving the economy a lift. Consumer spending accounts for the bulk of economic activity.

Business spending on equipment and software jumped in the second quarter by the biggest amount in 13 years. That was encouraging, analysts said, because it means companies are eventually going to start adding jobs.

"Companies are spending and eventually it will turn into employment," said RON Weiner, president and CEO at RDM Financial Group. "Eventually they need to hire people to run the computers" they are buying, Weiner said.

In late morning trading, the Dow Jones industrial average rose 3.10, or less than 0.1 per cent, to 10,470.56. The Standard & Poor's 500 index fell 0.17, or less than 0.1 per cent, to 1,101.36, while the Nasdaq composite index rose 1.13, or 0.1 per cent, to 2,252.82.

Even as some investors moved back into stocks, many stayed in safer Treasurys. The yield on the 10-year Treasury note, which moves opposite its prices, fell to 2.93 per cent from 2.99 per cent. Its yield is often used as a benchmark for interest rates on mortgages and other consumer loans.