Stocks end mixed on weak earns, 2% GDP gain

• Third-quarter GDP comes in at 2%, topping estimates
• Apple earnings miss dents investor sentiment
• S&P 500 index down 3.7% in recent pullback

NEW YORK -- U.S. stocks ended mixed Friday, with the Nasdaq composite index just shy of the 3,000 mark, as investors digested disappointing earnings and the latest evidence of an improving but still weak economy.

Apple, the most valuable stock in the world, posted quarterly earnings Thursday night that were below expectations, the latest high-profile profit disappointment in what has been a weak profit reporting season.

Ahead of the open, the mood on Wall Street had been negative, but rebounded after the government reported that third-quarter economic growth, known as GDP, rose by 2% at an annual rate. Stocks were mixed in morning trading, settled into a downward trend in the afternoon, then finished mixed.

Gaining slightly were the Dow Jones industrial average, up almost 4 points to 13,107, and the Nasdaq, up nearly 2 to 2,988. Down a little bit was the S&P 500, shedding 1 point to close at 1,412.

Despite a few bright spots here and there on the earnings front, investors remain discouraged. Although GDP topped analysts' expectations of 1.8% and was better than last quarter's sluggish growth rate of 1.3%, the economy is still not growing at a 3% rate or better, considered healthy enough to generate job growth.

Apple, the iPad and iPhone maker, reported profits 8 cents shy of analysts' per-share estimates despite topping revenue forecasts in its fiscal fourth-quarter results. The company also downgraded its profit forecast for the current quarter. Apple (AAPL) shares had dipped below $600 for the first time in three months but rebounded above that level in mid-afternoon trading.

Internet retailer Amazon also posted earnings after Thursday's close that fell shy of expectations, which also depressed investor sentiment. Amazon (AMZN) posted a loss of 60 cents a share, including a large loss related to its stake in online deals service Living Social. Analysts had expected a loss of 7 cents a share. But shares were up 5.4% in afternoon trading Friday.

A weak third-quarter profit-reporting season has been instrumental in dragging stock prices down in recent weeks, after all the major stock indexes hit fresh multi-year highs. Stocks had been driven higher due to a third round of stimulus from the Federal Reserve and signs of a housing recovery.

But investors need to see the economy doing better and companies boosting sales if the market is to regain its bullish tone, says Sung Won Sohn, an economics and business professor at California State University Channel Islands.

"The stock market has been sitting on a cushion of air provided by the Fed," he says. "Sooner or later the economy and earnings have to back it up. But that is not what is happening right now."

Heading into Friday's trading, the Dow Jones industrial average is 3.6% below its 2012 high, the Standard & Poor's 500 index is off 3.7% and the technology-filled Nasdaq composite 6.2% off its recent peak. The broad market has not suffered a 5% pullback since a nearly 10% drop in the April-through-June period.

Nearly half of the companies in the S&P 500 have reported third-quarter profits. And the results have not been pretty, as economic slowdowns in Europe, China and at home have slowed demand for products and services.

Of the 244 companies that have reported, 62.3% have topped expectations, in line with historical averages, according to Thomson Reuters. But top-line growth, known as revenue, has been weak. Only 36.3% of companies have topped analysts' revenue projections, far below the normal beat rate of 62%.

Earnings out this morning continued to show a mixed picture. Cable operator Comcast posted earnings in-line with expectations and beat revenue forecasts. Drug maker Merck topped earnings-per-share forecasts by 3 cents, but was shy on revenue.

What companies are saying about their future earnings prospects for the October-December quarter has not been positive. Of the 43 companies that have issued forward guidance, 33 have been negative, 8 have been in line and only 2 have been positive, according to S&P Capital IQ. The 16.5-to-1 ratio of negative-to-positive profit pre-announcements is very troublesome, analysts say.

The weak guidance and still-tepid GDP growth signal that the economy continues to struggle. The economy and stock market have also been hurt by business cautiousness due to uncertainty related to the presidential election and so-called "fiscal cliff," a growth-stunting combination of tax hikes and government spending cuts that could kick in at year-end unless Congress acts to avert it.

Contributing: The Associated Press.