In major economic news, the Commerce Department said Q2 gross domestic product rose at its fastest pace in more than a year, but came in slightly below expectations. The GDP was revised up 4%, vs. estimates of an upward revision of 4.1%. According to another report, U.S. jobless claims surprisingly rose last week to the highest level since April.

In early trading, the Dow fell 79.82, or 0.60%, to 13,209.47. The Standard & Poor's 500 index dropped 8.98, or 0.61%, to 1,454.78, and the Nasdaq composite index slipped 11.98, or 0.47%, to 2,551.18. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.52% from 4.56% late Wednesday.


09:00AM U.S. stock futures pointed to a lower opening. Robust GDP figures helped limit losses.

U.S. stock futures pointed to a weak opening Thursday after prior session’s strong rally on bargain-hunting. Market sentiment was hurt by growing uncertainty about how soon the Fed may cut interest rates. However, indexes pared losses after data showed that economy continued to grow in Q2 despite the subprime home-loan crisis.

The Commerce Department said that U.S. economy bounced back in Q2, growing at a 4% annual real growth rate, led by trade and business investment. The upward revision to GDP was attributed to an improved trade balance and to the biggest increase in investments in commercial buildings in 26 years. Consumer spending, government spending and inventories also contributed, while housing was the biggest drag. Economists had been expecting GDP in Q2 to be revised to 4.1% from the 3.4% growth rate originally estimated a month ago.

Lehman Brothers (LEH: chart) also weighed on sentiment after cutting its profit estimates for 2007 and 2008. It also said that earnings at the U.S. biggest securities firms will be hurt by credit-market woes. Lehman reduced its earnings estimates for Wall Street's top investment banks. Following the news, Goldman Sachs Group (GS: chart), Morgan Stanley (MS: chart) and Merrill Lynch & Co. (MER: chart) moved to the downside.

In corporate news, Motorola (MOT: chart) shares rose 0.4% as Lehman Brothers upgraded its stock to overweight from equal-weight on recovery hopes. On the earnings news front, H&R Block (HRB: chart) said its Q1 loss widened compared with last-year figures as it struggled with its mortgage lending arm. Mortgage giant Freddie Mac (FRE: chart) posted Q2 net income drop of 45% mainly due to a higher provision for credit losses.

Another economic report showed that initial jobless claims unexpectedly rose in the latest week by 9,000 to 334,000 from last-week revised figure of 325,000. The 4-week moving average was 324,500, an increase of 6,250 from the previous week's revised average of 318,250.S&P 500 futures fell 7.9 points, below fair value. Dow Jones industrial average futures shed 58 points, and Nasdaq 100 futures fell 4 points.


8:30AM New York – 6:00 PM Mumbai – Market in Mumbai trading advanced on broad rally. Deal making and expectation of lower inflation helped averages to gain.

Sensex in Mumbai trading jumped 0.86% or 128.7 to close at 15,121.74 and CNX Nifty increased 53 or 1.22% to close at 4,412.30.

Daily turnover on Bombay Stock Exchange rose to 5,378 crore rupees from 4,815 crore in the previous session. Turnover on National Stock Exchange increased to 6,171.7 crore rupees from 5,197 crore.

Of the stocks traded on BSE, 1,578 advanced, 1,112 declined, and 84 were unchanged. Among the stocks included in Sensex 21 edged higher and 7 fell. Mahindra & Mahindra led index stocks with a rise of 2.5% or 672 rupees.

M&M, truck and auto vehicle maker said that it is conducting due diligence to purchase Ford luxury car divisions Jaguar and Land Rover. Tata Motors gained 0.6% to 679 rupees.

Sugar companies rallied for the second day in a row after the report that the government is looking to blend 10% ethanol in petrol sales as early as October 2008. The government is also planning to reduce import duty to 5% from 7.5% on industrial ethanol.

Smaller mills Dwarikesh Sugar and Triveni Sugar jumped more than 10%. Baja Hindustan increased 2.5% to 137 rupees and Balrampur Chini Mills increased 2.7% to 61 rupees.

Sun TV Network gained 5.5% to 329 rupees on the news that that the company has purchased 49% stake in Red FM radio station to expand its business in the Northern India. NDTV added 3.5% to 351 rupees on the news reports that UB group has agreed to spend 100 crore rupees on the upcoming life style television channel NDTV Good Times.

Banks were in demand and closed higher in the rally as investors hoped that rate hikes are not likely in the near future. Traders speculated that inflation report due tomorrow will show lower rate of 3.9% from the latest report of 4.1% at the end of August 11.

Syndicate Bank led the sector with a gain of 2.8% to 76 rupees followed by HDFC Bank with a rise of 2% to 1,180 and Andhra Bank gain of 2% to 82 rupees. ICICI Bank increased 1.5% to 869 rupees. Vijaya Bank gained 5% to 56 rupees after the bank said that it plans to sell a stake in its asset management subsidiary.