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Stocks mostly lower on tepid US economic growth

Steve Rothwell, AP Markets Writer

In this Tuesday, April 16, 2013, photo, Specialist Michael O'Mara, left, and trader Fred Demarco work on the floor of the New York Stock Exchange. World stock markets fell Friday April 26, 2013 after Japan faced an unwelcome drop in consumer prices. (AP Photo/Richard Drew)

NEW YORK (AP) -- The stock market sputtered Friday after the U.S. economy didn't grow as much as hoped. Neither did earnings from a handful of big companies like Amazon.com.

The economy grew at an annual rate of 2.5 percent in the first three months of the year, the government said, missing the 3.1 percent forecast of economists polled by FactSet, a financial data provider. That's still better than the anemic 0.4 percent growth rate in the October-December quarter.

The shortfall reinforced the perception that the economy is grinding, rather than charging, ahead. Investors have also been troubled by reports in the last month of weaker hiring, slower manufacturing and a drop in factory orders.

"There are some concerns as we head into the summer," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "In the last three weeks, we've have seen numbers that weren't exactly what you'd love to see."

Corporate earnings this week have also contained worrisome signs. Many companies have fallen short of analysts' estimates for revenue, even as they report higher earnings. For example, Goodyear Tire fell 2.3 percent to $12.64 after reporting revenue that fell short of analysts' estimates because of lower global tire sales.

Among other big names that investors were focusing on Friday, Amazon.com fell 7.2 percent to $254.60 after the company said it may report an operating loss in the second quarter. The online retailer's income fell in the first quarter as it continued to spend heavily on order fulfillment and rights to digital content. Expedia fell 9.5 percent to $58.80 after the online travel company's costs rose.

Homebuilder D.R. Horton surged 7.1 percent to $26.26 its income nearly tripled thanks to a continuing recovery the housing market. The results were handily beat the forecasts of financial analysts who follow the company.

Of the companies that have reported earnings so far, 69 percent have exceeded Wall Street's expectations, compared to a 10-year average of 62 percent, according to S&P Capital IQ. However, many have missed analysts' revenue estimates.

The Dow was down 10 points, or 0.1 percent, at 14,691 as of noon. The index is 1 percent higher in the week.

The S&P 500 index fell seven points to 1,578, or 0.4 percent, paring its gain for the week to 0.7 percent.

The Nasdaq composite was down 20 points at 3,269, a decline of 0.6 percent. The index is still 2 percent higher this week.

The tech-heavy index has lagged both the Dow and the S&P 500 this year, but led the way higher this week, boosted by Microsoft. The software giant, which makes up 5.3 percent of the Nasdaq, is on track to record its biggest weekly gain since January last year, after reporting earnings April 19 that beat Wall Street expectations and revealing an aggressive push into the computer tablet market.

Even Apple, the largest stock in the Nasdaq, had a good week, advancing 5.8 percent to $413.20, despite posting a decline in quarterly profit Tuesday. Apple accounts for 7.6 percent of the index's value and the weekly gain was its biggest since November.

On the whole, stocks have had a relatively poor April.

Stocks are still up for the month, but the gains are far below those made in the first three months of the year. The Dow and the S&P 500 are up 0.8 percent and 0.7 percent respectively in April, compared with the average gains of more than 3 percent they posted in January, February and March.

Slower hiring in the U.S. and weaker manufacturing held back stocks in April. The markets logged their biggest weekly decline in more than five months last week on concerns that global growth is faltering. China said its economy slowed in the first quarter.

J.C. Penney jumped 6.7 percent to $16.26 after the billionaire financier George Soros disclosed that he had taken a 7.9 percent stake in the company. Earlier this month the struggling department store chain fired its CEO, Ron Johnson, after 17 months on the job and rehired his predecessor Mike Ullman. An ambitious turnaround plan by Johnson had backfired and caused sales to plummet.

In government bond trading, the yield on the 10-year Treasury note fell to 1.67 percent from 1.71 percent, its lowest rate of the year.