GDP report leaves traders in a selling mood, putting weekly gain in jeopardy. Indices across the globe are lower this morning on concerns about U.S. growth prospects. Earnings reports are a bit lighter today, but we have gotten reports from Amgen (AMGN), Chevron (CVX) and Merck (MRK). The S&P 500 (SPX) is currently trading below 1,100, which is a key technical support level.

GDP in the second quarter rose 2.4 percent, but this fell short of estimates and has traders concerned about the economy. However, the first quarter reading was revised sharply higher to 3.7 percent growth from 2.7 percent. The fact is that a double dip recession seems unlikely, but until housing and the jobs market improve, there will be these concerns. Comments from St. Louis Fed president Bullard that the U.S. is at risk of deflation also has traders in a bearish mood.

Amgen beat earnings estimates by 8-cetns a share with revenues slightly above expectations as well. The company also confirmed guidance for 2010, yet the stock is seeing a decline of about one percent in early trading near a price of $53. Competitor Merck is also seeing its shares decline after its earnings release. The company beat by 3-cents a share, but revenues were a bit light, leading to a drop of 1.5 percent in MRK shares.

Oil giant Chevron also reported earnings that blew past expectations with revenues also above estimates. CVX beat by 26-cents a share with revenues up 31.8 percent to $53 billion. Nonetheless, traders are pushing the stock lower in early trading, down 1.0 percent to a price near $75.30. The Oil Services HOLDRs (OIH) are also down more than 1.0 percent.

In other economic news, the Chicago PMI was much stronger than expected in July. The index rose to 62.3 during the month, up from 59.1 in June and well above estimates for a reading of 56.0. This ends a string of mostly disappointing manufacturing releases.

Overall, we could see a reverse of Thursday’s session where stocks started strong and ended in the red. Stocks are lower in early trading Friday, but economic news and earnings have been mostly positive, which could lead to some gains heading into the close today. The Dow (DJI) closed the prior week at 10,424 with the SPX at 1,102, so we need to see some gains as the session progresses to keep these indices in the black for the week.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site