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U.S. stocks slump on disappointing GDP data

Xinhua, January 31, 2015 Adjust font size:

U.S. stocks slid in the morning session on Friday as the U.S. government announced the economy grew lower in the final quarter of 2014.

Around midday, the Dow Jones Industrial Average fell 99.92 points, or 0.57 percent, to 17,316.93. The S&P 500 shed 11.51 points, or 0.57 percent, to 2,009.74. The Nasdaq Composite Index dipped 22.86 points, or 0.49 percent, to 4,660.54.

The U.S. real gross domestic product (GDP) expanded at an annual rate of 2.6 percent in the fourth quarter of 2014, below market expectations, said the Commerce Department Friday.

The economy grew 5 percent in the third quarter and 4.6 percent in the second quarter after contracting in the first three months of the year. In whole 2014, the economy expanded 2.4 percent, compared with an increase of 2.2 percent in 2013.

The department said that the decelerated GDP growth in the fourth quarter mainly reflected an upturn in imports, a downturn in federal government spending and decelerations in nonresidential fixed investment.

However, the consumer spending, accounting for more than two- thirds of U.S. economy activity, increased at a 4.3 percent pace in the fourth quarter, compared to 3.2 percent pace in the third quarter 2014.

"Households are benefiting from cheaper oil and a stronger dollar already, but as we expected, the negative impact on companies, both on exports and investment, depressed GDP in the fourth quarter and likely will again in the first quarter of 2015. GDP should reaccelerate after that, but weakness early in the year could keep Fed liftoff at bay until the third quarter of 2015," said Chris Low, chief economist at FTN Financial, in a note.

On corporate news, Google shares rose 4.61 percent around midday Friday after the tech giant reported its fourth-quarter revenue increased 15 percent to 18.10 billion dollars from a year ago.

Amazon shares surged nearly 13 percent after the U.S. e- commerce giant posted a better-than-expected profit of the fourth quarter.

Shares of Alibaba rebounded 1.38 percent around midday from the previous day's plunge on worse-than-expected quarterly earnings.

Latest data from Thomson Reuters showed that S&P 500 companies' per-share earnings in the fourth quarter are expected to grow 5.3 percent year on year, while revenue growth is forecast to increase 1.6 percent. Endite