Wall St falls as economy shrinks

NEW YORK (Reuters) - Stocks fell on Friday hit by news that the economy shrank at its fastest pace in nearly 27 years while economic data and downbeat earnings added to investors' worries about the predicament of industries and consumers.

Highlighting the slowdown in spending, Procter & Gamble Co , the world's largest consumer products maker, was the Dow's top decliner with a 5 percent fall following its report that showed quarterly profit missed expectations. P&G added its name to a growing list of companies cutting their outlooks.

U.S. gross domestic product for the fourth quarter fell at a 3.8 percent annual rate that was not as bad as analysts' expectations. Still, it was the biggest drop since 1982's first quarter. In a bad sign for corporate profits, the GDP data showed inventories of unsold goods rose, compared with falls in recent quarters. Economists had forecast fourth-quarter GDP would shrink at a 5.4 percent rate.

"The build-up in inventories muted the decline in GDP, but that becomes a drag going forward," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

"It creates concern that it might take longer to get out of this mess."

The Dow Jones industrial average <.DJI> fell 78.61 points, or 0.96 percent, to 8,070.40. The Standard & Poor's 500 Index <.SPX> slid 9.11 points, or 1.08 percent, to 836.03. The Nasdaq Composite Index <.IXIC> lost 15.31 points, or 1.02 percent, to 1,492.53.

P&G shares fell 5.2 percent to $55.19, making it the top drag on the Dow.

The Nasdaq's decline was led by a 2.3 percent slide in Apple shares to $90.91, and was only partly offset by a jump of almost 17 percent in Amazon.com , following the online retailer's rosy outlook and holiday sales. Amazon's stock traded at $58.46, up $8.46.

In the S&P 500, the largest drop came from Juniper Networks , down nearly 16 percent at $14.30, as the network equipment provider warned its first-quarter revenue and profit would fall far short of Wall Street's expectations.

Companies in the basic materials sector were the worst performing in the S&P 500, as a 3.2 percent slide in the S&P materials index <.GSPM> weighed the broad index down.

Broad declines threatened to send the S&P 500 down in its worst January in nearly two decades, with the benchmark index off 7.4 percent for the year so far. January performance traditionally serves as a harbinger for stocks for the rest of the year.

On the upside, oil giants Exxon Mobil Corp , up 2.1 percent at $78.42, and Chevron Corp , up 1.4 percent at $71.64, ranked among the Dow's bright spots after they posted higher-than-expected quarterly earnings. Exxon's full-year profit set a record.

U.S. oil futures for March delivery rose 46 cents to $41.90 a barrel at midday in New York, reflecting a pullback from session highs on worries about demand due to a revision in U.S. Energy Information Administration data.

(Editing by Jan Paschal)

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