Stocks move lower after new growth figures

By Reuters

Stocks fell on Friday on news the U.S. economy grew more slowly than expected in the last quarter of 2011, while the euro held firm on hopes of an imminent deal on Greece's debt that could help avert a disorderly default.

The world's biggest economy grew at an annualized 2.8 percent pace during the last three months of 2011. It was the fastest growth rate in gross domestic product in 1-1/2 years, but fell short of the 3.0 percent predicted by economists, and much of the increase came from inventory building rather than business investment or consumer spending.

For the year, U.S. GDP grew 1.7 percent, weaker than the 3 percent growth in 2010.

The GDP report spurred worries about U.S. economic growth after the Federal Reserve signaled its own doubt on Wednesday, when it delayed the timing for an interest rate hike until at least late 2014.

"Today's GDP numbers, while positive, indicate that the economy is not really doing all that well and (Federal Reserve) Chairman Bernanke's extreme policy may be in fact what's needed," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

European stocks were down 0.9 percent after flirting with five-month highs earlier, while Tokyo's Nikkei closed down 0.09 percent. Emerging market stocks clung to a 0.2 percent gain after touching a new three-month peak earlier.

In Europe, European Union Economic and Monetary Affairs Commissioner Olli Rehn said talks with private creditors on restructuring Greek debt are "very close" to closing. Athens needs a deal quickly to avert an unruly default when a major bond redemption comes due in March, an outcome that could wreak havoc across financial markets.

The mark-up that investors charge other indebted European economies' bond issues also fell. Italy's six-month borrowing costs dropped below 2 percent at an auction, the lowest since May, due to demand from domestic banks flush with European Central Bank funds. Spanish 10-year government bond yields also fell to their lowest since November 2010.

"We could see the market going higher if there was a positive outcome as far as the Greek debt talks are concerned," said Keith Bowman, equity analyst at Hargreaves Lansdown in London. But he cautioned that a deal would not solve the broader issues of fiscal support across the union.

Source: http://bottomline.msnbc.msn.com/_news/2012/01/27/10251419-stocks-move-lower-after-new-growth-figures

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