US stocks set to recover after slide
Feb 25 2011 17:13
Sapa-AP
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New York - Stocks appear headed for a higher opening, as traders shrugged off a government report that the US economy grew more slowly than first thought in the last three months of 2011.
Stocks have fallen for this week as turmoil accelerated in Libya. The uprising has caused a spike in the price of oil this week.
Before the market opened Friday, the Commerce Department said the economy expanded at an annual rate of 2.8% in the October-December quarter. That’s weaker than the previous estimate of 3.2%. In an attempt to close budget gaps, state and local governments have cut spending much more deeply than previously thought.
Annual growth slightly above 3% is considered decent when the economy is on solid footing. But economic growth would need to hit 5% for a whole year to make much of a dent in the 9% unemployment rate.
Before the opening bell, Dow futures are up 66, or 0.5%, at 12 103. Standard & Poor’s 500 index futures are up 9, or 0.7%, at 1 311. Nasdaq 100 index futures are up 20, or 0.9%, at 2 328.
Libya is Africa’s largest producer of oil but only ranks 15th among the world’s oil exporters. Traders have been concerned that fighting could not only threaten Libya’s oil production but also spread to other countries in the region, such as Saudi Arabia, the world’s largest exporter.
Higher oil prices also weigh on the US economy by increasing the costs of moving goods and filling up gas tanks. A sustained $10 increase in the price of oil translates into a 0.2% cut in economic growth over 12 months, according to a recent estimate by economists at Goldman Sachs.
Oil prices are hovering around $97 a barrel after reaching $103 Thursday, with signs the crisis in Libya may have cut supplies less than previously estimated and as Saudi Arabia pledging to boost production.
Both the Dow Jones industrial average and the Standard & Poor’s 500 index are on track for a weekly loss. The Dow had notched three straight weeks of gains.
Despite this week’s slide, the S&P 500 is still up 1.6% in February and 3.9% for the year. Stronger earnings from a wide range of companies, including Archer Daniels Midland Co. and Dell Inc., have helped drive stocks higher.
