Sun, Oct 29, 2006 - Page 10 News List

US stocks weather growth slowdown

GENERALLY BUOYANT The major US indexes closed the week higher, despite a government report saying that growth slowed to its worst performance since 2003

AFP , NEW YORK

The major US stock indexes ended slightly higher on the week on Friday, with the Dow Jones Industrials managing to stay above 12,000 points despite a report showing a surprise slowdown in US economic growth.

In the week to Friday, the Dow Jones Industrial Average of 30 blue-chip stocks climbed 0.73 percent to end at 12,090.26.

The Dow had tumbled in Friday trading, but managed to remain above 12,000 points, a barrier it smashed through for the first time ever last week.

The technology-weighted NASDAQ composite meanwhile rose 0.35 percent to 2,350.62, while the broad-market Standard & Poor's 500 increased 0.64 percent on the week to 1,377.34.

Stocks remained generally buoyant during the week on robust third-quarter corporate earnings reports, particularly from the oil sector as industry giant ExxonMobil Corp, posted record third-quarter net profits of US$10.49 billion.

Earnings from software maker Microsoft and AT&T also came in ahead of Wall Street forecasts, although profits from Boeing and Altria did not meet market hopes.

Third-quarter corporate earnings, however, in general continue to be robust, but the economic news is getting murkier.

The government said on Friday that US growth on an annualized basis slowed abruptly to 1.6 percent, against forecasts of 2.1 percent, and compared to second-quarter growth of 2.6 percent.

The report showed US growth posted its worst performance since the first quarter of 2003, due above all to the end of a long boom in the US property market.

"What really matters now is not third-quarter GDP, is not third-quarter earnings. What matters now is fourth-quarter and 2007," said Hugh Johnson, an analyst with Johnson Illington Advisors.

"The message of the market is: It will be a soft landing, but if it is a soft landing it will be a close call," he said of the economy's direction.

Some economists agreed with this outlook.

"While weak growth fanned fears of a potential stall in the economy at the end of last week, indicators this week should, on balance, support the soft-landing scenario," Global Insight US economists Nigel Gault and Brian Bethune said.

Analysts said the key report in the coming week would be Friday's release on this month's non-farm payrolls, and its revealing snapshot on the health of the job market.

Market forecasts call for non-farm payrolls to rise by 125,000 positions this month, compared with lackluster hiring of 51,000 in the prior month.

The coming week will also see releases on personal spending, construction spending, consumer confidence and auto sales.

Total auto industry sales for this month are forecast to remain steady at around 5.3 million units compared with August.

Bond prices strengthened in the past week. The yield on the 10-year Treasury bond fell to 4.675 percent from 4.784 percent a week earlier, while that on the 30-year bond declined a to 4.796 percent from 4.904 percent.

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