On Thursday, the market welcomed Wachovia Corp.'s purchase of brokerage A.G. Edwards for $6.8 billion, which helped investors shrug off news that first-quarter growth was revised to 0.6% from an initial estimate of 1.3%.
"It's an awful number, but it is a revision, and there is a feeling that it just shows something that happened in the past," said Peter Cardillo, chief market economist at Avalon Partners.
The Dow Jones Industrial Average finished 5.4 points lower at 13,627. The Dow earlier hit a record high of 13,673, before losing some steam amid consolidation pressures.
For the month of May, the Dow powered ahead with a 4.3% gain.
Of the Dow's 30 component stocks, 16 advanced, led by the likes of United Technologies , Dupont , McDonald's and AT&T Inc. .
Shares of Citigroup Inc. fell 1.3%. Wachovia's purchase of A.G. Edwards pushed it past Citigroup as the second-largest retail brokerage firm in the U.S. behind Merrill Lynch .
The S&P 500 gained 0.39 points to 1,530.62 Thursday, beating its record closing high from Wednesday by a fraction. For the month, the broad index advanced 3.2%.
The Nasdaq Composite rose 11.9 points to 2,604 on Thursday, while it gained 3.1% in May.
Investors say that behind the market's record-breaking performance in May and this year is a seemingly never-ending source of mega deals, including private-equity takeouts.
According to Thomson Financial, May 2007 saw 41 mergers of $1 billion or more, the largest number of any month in history.
On Thursday, the attention focused on A.G. Edwards Inc. , which gained 14.3%. The brokerage house was bought by Wachovia for $6.8 billion in cash and stock. The deal will create the second-largest retail brokerage firm in the U.S.
In other acquisition news, Morgan Stanley bought Australia's Investa Property Group for $3.9 billion.
By sector, broker dealers led the gains, along with metals miners and networking issues , while oil services , banks and Internet fell.
Trading volumes showed 1.8 billion shares exchanging hands on the New York Stock Exchange and 2.4 billion on the Nasdaq stock market. Advancing issues topped decliners by 19 to 13 on the NYSE and by 3 to 2 on the Nasdaq.
Among leading tech shares, Apple Inc. gained 2% after the company said that a free software download will allow viewers with Apple TV to watch video from YouTube on their televisions.
Bucking the trend among Internet shares, Yahoo Inc. gained 1.1%. The online portal was upgraded to overweight from neutral at J.P. Morgan after the company announced the resignation of its chief technology officer, Farzad Nazem.
Asian recovery, U.S. slowdown?
U.S. stocks had rallied on Wednesday after overcoming morning jitters about a sharp Shanghai stock market decline. The Dow industrials managed a 111-point gain and the Nasdaq shot up 20 points.
On Thursday, the relief continued overseas, with several Asian and European benchmarks rebounding strongly.
The upbeat mood also helped investors overlook a sharp downward revision in the first quarter GDP. The Commerce Department said that the weak new 0.6% growth estimate for the first quarter marked the slowest growth since late 2002. Economists surveyed by MarketWatch were expecting GDP to be revised to 0.7%.
Investors also found comfort in more data released Thursday, including a business survey from the Chicago region, April construction spending and weekly jobless claims.
But Ian Shepherdson, chief U.S. economist at High Frequency Economics, said that while growth might be better in the second quarter than in the first quarter, it will not be "by much."
A 4.4% gain in consumption in the first quarter still led to 0.6% overall rowth, while consumption is expected to rise about 2% in the second quarter, he noted.
Retail stocks still advanced on Thursday, shrugging off disappointing results from Sears Holdings , which tumbled 1.8%.
Tiffany Co. rose 0.2% after the high-priced jeweler posted strong first-quarter earnings.
Also, Costco Wholesale Corp. fell 0.1% after posting a 5% decline in net profit that was in line with analysts' expectations.
Treasurys fell following the raft of recent economic data after failing to react to the downward revision in first-quarter growth. The benchmark 10-year Treasury note finished down 5/32 at 96-30/32 with a yield of 4.892%.
The dollar was down against the euro, following strong economic sentiment figures out of Europe. But it rose against the yen.
Crude oil fell, with the front-month contract losing 70 cents to close at $62.79 a barrel. Oil reversed early gains after news that crude supplies fell for the first time in six weeks, while gasoline inventories rose for the fourth-straight week.
Gold for June delivery moved $7.90 higher to close at $661 an ounce, as investors cheered an overnight recovery in Asian markets.
Stocks in motion
Motorola announced a new rounds of layoffs. This time it is cutting 4,000 jobs in response to slower mobile phone sales.
The Wall Street Journal is reporting that Brocade Communications Systems will pay $7 million to settle allegations by the Securities and Exchange Commission that it issued improper stock options grants. The agreement makes Brocade the first company to pay a fine in the backdating scandal.
By Nick Godt