U.S. MARKET AVERAGES

U.S. stock futures are sitting close to the flat line predicting a mixed start of Friday trading session. The Nasdaq is holding down on cautious outlooks from Microsoft and Tekelec, while the Dow and S&P are showing modest gains. Investors are awaiting a government report to show the economic growth rate in the third quarter.

Third-quarter Gross Domestic Product data is expected to show growth of 3.6% from 3.3% in the second quarter. Consumer sentiment in October, to be released in the early part of the trading day, is also expected to rise.

On the earnings front, Microsoft posted fiscal first-quarter earnings rise of 24% on strong demand, but lowered guidance. Baker Hughes Inc., oil services company, said third-quarter net profit rose 61% on price increases, productivity improvements, and a lower effective tax rate. Bristol-Myers Squibb, drug maker, reported Q3 net income increase, beating estimates.

Overseas, Deutsche Bank reported a 46% rise in net income during the third quarter on sales and trading revenue, as well as growing mutual fund sales in Germany.

Dow Jones futures were recently up 7 points, S&P 500 futures were up 1.2 point, and Nasdaq 100 futures were off 2.5 points.

ECONOMIC NEWS

Even with the impact of Hurricanes Katrina and Rita during the period, economic growth accelerated during the third quarter, according to government data released Friday.

The U.S. Commerce Department revealed that Gross Domestic Product, a broad measure of the economy, grew at an annual rate of 3.8% in the July-to-September quarter. This was an acceleration from the 3.3% growth rate shown during the previous 3-month period.

The government reported that a pick up in personal consumption expenditures and in federal government spending contributed to the acceleration of GDP growth, as did a smaller decrease in private inventory investment. These factors were partially offset by decelerations in exports, in residential fixed investment, and in state and local government spending.

Personal consumption expenditures climbed by 3.7% in the third quarter, the government said, an acceleration from the 3.3% growth recorded in the previous period. However, excluding the volatile food and energy sectors, personal consumption expenditures advanced by just 1.3%, a decline compared to the second quarter's 1.7% growth rate.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed broadly down with the Nikkei falling 0.5% on disappointing industrial production report, showing 0.2% output increase .versus expectations of a 2% growth. The other regional markets finished the session with heavy losses. South Korea’s Kospi dropped 2.2%, Hong Kong’s Hang Seng declined 1.2%, and Australia’s All Ordinaries lost 1.1%.

European markets traded lower at mid-day, hurt by weak U.S. equity markets, decline in the automotive sector, and earnings report from Microsoft. Gains from Deutsche Bank, GlaxoSmithKline and Vodafone offset some of the losses. The German DAX 30 lost 0.1%, the French CAC 40 shed 0.3%, and London’s FTSE 100 was down 0.1%.

ENERGY, METALS, CURRENCIES

Crude oil prices steadied round $61 a barrel. Light sweet crude December contract rose 1 cent to $61.10 a barrel on the Nymex. Heating oil fell marginally to $1.8490 a gallon. Gasoline inched down to $1.5925. London Brent gained 6 cents to $59.20.

Gold futures further advanced in European trading on weaker dollar. In London gold traded at the recommended price of $473.65 per troy ounce, up from $472.80. In Zurich it traded at $473.35, up from $473.15. In Hong Kong the precious metal rose 40 cents to close at $474.05. Silver opened at $7.81, up from $7.80.

In European trading the U.S. dollar traded mixed against its major counterparts. The euro was quoted at $1.2147, up from $1.2143. The dollar changed hands at 115.24 yen, down from 115.31. The British pound was trading at $1.7807, down from $1.7843.

EARNINGS NEWS

Microsoft Corp. (MSFT: chart), software maker, reported quarterly net income of 29 cents per share, up vs. 23 cents per share in the year-ago period. The latest quarter results included a charge of 2 cents per share to account for a legal settlement with RealNetworks Inc. The results for the year-ago period included a one-time charge of 3 cents per share, to account for a legal settlement with Novell Inc. Excluding the one-time charge, the company would have gained 31 cents per share, topping on that basis analyst projections by a penny.

Bristol-Myers Squibb (BMY: chart), drug maker, posted Q3 earnings from continuing operations of 49 cents a share, up from an equivalent profit of 38 cents a share in the prior year period, beating analyst estimate of 33 cents a share. If not for items, the company earned 31 cents a share in Q3, down from 44 cents a share in the year-ago time. Sales from continuing operations amounted to $4.77 billion, down slightly from $4.78 billion in the same period a year ago.