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(05-31) 14:18 PDT NEW YORK, (AP) —

Stocks finished largely flat Thursday after a weak reading of the nation’s gross domestic product muted Wall Street’s enthusiasm over a new spate of acquisitions. Technology stocks fared better than most, however.

The Commerce Department’s latest estimate of first-quarter GDP was 0.6 percent, lower than the average economist estimate of 0.8 percent and the 1.3 percent the government projected in April.

The fact that first-quarter growth has been the most sluggish since the last quarter of 2002, but that the Dow Jones industrial average has nonetheless surged more than 9 percent this year, made some investors pause.

“There’s friction between those two numbers. That’s why investors are a little bit worried, and why we’re not hitting home runs every day,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.

Still, most on Wall Street expect growth to pick up later in the year, and remain optimistic about the stock market thanks to the unrelenting wave of takeovers, which are on track to beat last year’s record tab of $4 trillion.

On Thursday, banking company Wachovia Corp. said it would acquire A.G. Edwards Inc. for $6.8 billion in cash and stock to form the second-largest retail stock brokerage in the country. And payroll processor Ceridian Corp. said late Wednesday it will be bought out by investment firm Thomas H. Lee Partners LP and insurance provider Fidelity National Financial Inc. for about $5.3 billion.

The Dow Jones industrial average slipped 5.44, or 0.04 percent, to 13,627.64, after reaching a new trading high of 13,673.07. On Wednesday, the Dow rose more than 111 points and set a new closing high of 13,633.08.

Broader stock indicators managed gains.

The Standard & Poor’s 500 index advanced 0.39, or 0.03 percent, to 1,530.62, after soaring to a record close Wednesday for the first time since March 2000.

The technology-dominated Nasdaq composite index showed more pronounced movement, rising 11.93, or 0.46 percent, to 2,604.52. Gains in companies like Apple Inc. helped lift the Nasdaq. Apple rose $2.42, or 2 percent, to $121.19, after the company announced developments about its online products that pleased investors.

Though GDP growth was slower than anticipated, jobs and the manufacturing sector looked strong. The Labor Department reported Thursday that the number of U.S. workers filing jobless claims dropped last week for the sixth time in seven weeks, and the Chicago Purchasing Managers said its manufacturing index rose to 61.7, higher than expected and up sharply from the April reading of 52.9. The purchasing managers index is seen as a precursor to the national report from the Institute for Supply Management, scheduled for release Friday.

Also, the Commerce Department said construction edged up by 0.1 percent in April, down from a 0.6 percent gain in March but better than economists predicted.

“Overall, the economic news was rather benign. What people are responding to are the market’s own internal dynamics ? gravity,” said Alfred E. Goldman, chief market strategist at A.G. Edwards in St. Louis. “We have good and bad in the fundamentals; basically we just have a market that’s tired.”

Bonds fell on the strong manufacturing data. The yield on the benchmark 10-year Treasury note rose to 4.89 percent from 4.87 percent late Wednesday.

After Wachovia said it will buy A.G. Edwards, Wachovia slipped 36 cents to $54.19, and A.G. Edwards rose $11.01, or 14.3 percent, to $88.16.

In other corporate news Thursday, discount retailer Costco Wholesale Corp. and jewelry seller Tiffany & Co. released their financial results. Costco posted a fiscal third-quarter profit decline of 4.9 percent, while Tiffany reported a 15 percent rise in fiscal first-quarter profit ? indicating that consumer demand for big-ticket items remains robust.

Costco slipped 6 cents to $56.47, and Tiffany rose 11 cents to $52.57.

Sears Holdings Corp. reported a solid 20 percent gain in earnings from the recent quarter, but said its U.S. store sales dropped. Sears fell $3.23 to $180.02.

And Payless ShoeSource Inc., which recently said it was buying shoe seller Stride Rite, hit an all-time high after it reported a rise in fiscal first-quarter profit and better sales than analysts expected. Payless rose $1.01, or 2.9 percent, to $35.72.

The dollar was mixed against other major currencies, while gold prices rose.

Crude oil futures rose 52 cents to $64.01 a barrel on the New York Mercantile Exchange, after the U.S. government reported a surprise decrease in crude stockpiles but an increase in gasoline inventories. Retail gasoline prices are still high, but have come off of record levels; the average U.S. pump price was $3.191 a gallon Thursday, according to AAA, down from a record $3.227 a gallon reached last week.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.86 billion shares.

The Russell 2000 index of smaller companies rose 3.83, or 0.45 percent, to 847.18, reaching its second-straight record close.

Chinese stocks rebounded Thursday after a sharp drop a day earlier. The Shanghai Composite Index rose 1.4 percent.

Japan’s Nikkei stock average rose 1.63 percent. Britain’s FTSE 100 rose 0.29 percent, Germany’s DAX index rose 1.52 percent, and France’s CAC-40 rose 1.02 percent.

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- (Updating to say index highest since January 1988, adds further details)

TOKYO (XFN-ASIA) - The tertiary index, which measures spending in the services sector, increased 1.0 pct in February from January, rising for the second straight month, following a revised 0.4 pct gain in January, the Ministry of Economy, Trade and Industry said, citing preliminary data.

The index stood at 110.7 in February, the highest level since January 1988 under the current calculation method, a ministry official said. That compared to a revised 109.6 in January.

Year-on-year, the index increased 1.7 pct in February after a 1.1 pct gain in the previous month.

The services sector employs more than half of Japan’s workforce, and spending on services such as retailing, dining and travel is closely tied to changes in income and consumer confidence.

Spending on the wholesale and retail sector edged up 2.4 pct in February from the previous month on increased purchases of semiconductors and digital appliances.

Spending in the finance and insurance sector rose 4.1 pct in February from January, as reflected in the brisk trading in the stock market before the sharp plunge at the end of the month in line with the global equity rout.

Spending in the medical, healthcare and welfare sector increased 1.7 pct month-on-month, the ministry.

(1 usd = 118.30 yen)

kaori.kaneko@xfn.com

kk/mas

ROME (Thomson Financial) - Italian producer prices rose 0.4 pct in March from February and increased 3.8 pct year-on-year, the statistics office ISTAT said.

philip.webster@thomson.com

pw/bsd

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Watch today’s Markets Desk video.

Stocks treaded the late-day waters.

Gold & silver miners and Internet networkers showed the best gains, home builders and discount retailers took the biggest hits.

Investors may be settling in to wait out a raft of upcoming economic data due out Friday, including the May jobs report and the ISM manufacturing index.

The NYSE composite was up 0.3%, the Nasdaq 0.4% at 2:47 p.m. ET. The S&P 500 held its 0.2% gain, with small-caps and midcaps leading the way. The Dow rose 0.1%. Volume remained higher.

Gainers led decliners 4-to-3 on the NYSE, 3-to-2 on the Nasdaq. Leading stocks continued to make moves.

Heico () made a third day of strong gains, popping 2.71 to 43.71. The 7% move, on more than seven times average volume, extended the stock’s May 21 breakout from a 12-week cup-with-handle base. Shares are now 13% above a 38.74 buy point.

J.Crew Group () spiked up 2.41 to 44.88 on double average volume. The move snapped the stock above the 43.15 buy point of a 26-week cup-with-handle base. Shares are now 3% above that buy point.

Pension Worldwide () gained 1.55 to 28.85 on nearly double average volume. The global securities processing services firm saw its stock fall out of an attempted breakout attempt in April. Thursday’s 6% move lifted shares to their 50-day moving average line for the first time in five weeks.

Shares of Force Protection (), a maker of armor for military and other vehicles, lost 1.12 to 29.15. The stock is now 17% above the 24.83 buy point from a cup-with-handle.

1 p.m. update: NYSE Stocks Surrender Early Gains; Nasdaq Holds Ground

By ALAN R. ELLIOTT

Stocks sputtered in midday trading after rushing higher early.

Better news on the jobs front and righted Asian markets failed to counteract a four-year low in Q1 GDP growth.

The NYSE composite slipped from its intraday high, but held to a 0.3% gain at 12:50 p.m. ET. The Nasdaq was up 0.5%, propped up by the exchange’s finance and transportation indexes, which rose 1.4% and 1.2% respectively.

The S&P 500 rose 0.2%, edging nearer to its intraday record set in March 2000. The Dow also added 0.2%, but remained below its intraday high. Volume was running higher across the board.

This morning, the Chicago Purchasing Managers’ Index for May returned a strong 61.7 showing. It was the second time the volatile index hit that mark in three months, suggesting the region’s business investment was climbing back on track.

Leading stocks continued to stage solid moves.

Sun Hydraulics () jumped 1.99 to 42.94. The stock broke above a two-year-old high earlier this month and has been nailing new highs on above-average volume.

RTI International Metals () rose 2.55 to 88.35. The 3% increase left the stock level with its 50-day moving average for the first time in four weeks. The stock began consolidating in April. It is now 13% below its April 23 high.

China-based Internet search engine Baidu.com () rose 5.07 to 140.76. The stock has climbed for four straight days, despite Wednesday’s meltdown of Chinese markets. The 4% rise followed the breakout from a 14-week cup-with-handle base. Shares broke out May 14 on heavy volume. The stock is now 6% above the 132.90 buy point.

Discount retail chain Big Lots () reversed lower, losing 3.22 to 32.38. The 9% drop on more than double average volume negated Wednesday’s breakout from a seven-week flat base, leaving shares resting on their 50-day moving average.

11 a.m. update: Stocks Rise On Mixed Economic Data, Rebound In China’s Markets

By ALAN R. ELLIOTT

A broad swath of stocks headed for higher ground on a combination of mixed economic news, merger and acquisition activity and a good day on Asia’s stock markets.

The NYSE composite was up 0.4% at 10:52 a.m. ET. The Nasdaq was up 0.5%, with its financial index once again registering the strongest gains. The S&P 500 built on Wednesday’s record close, adding 0.2%. The Dow also rose 0.2%.

NYSE volume was tracking 7% above Wednesday’s level. Nasdaq volume was up 19%.

Asian exchanges recovered powerfully from the day earlier’s losses. The Shanghai composite climbed 1.4% and Tokyo’s Nikkei 225 added 1.6%. European stocks held firm, with London’s FTSE 100 notching a 0.5% gain.

The U.S. economy grew more slowly than expected in the first quarter, with Commerce Department data showing a 0.6% increase, below expectations.

That was good news for those hoping that slower growth could lead the Federal Reserve to cut interest rates later this year, bad news for those banking on U.S. economic expansion. The GDP data was offset by Labor Department figures showing unemployment claims declined for the sixth time in seven weeks. The decline was not as sharp as expected, however.

Financial sector buyouts crowded the headlines, with Wachovia () agreeing to buy regional brokerage A.G. Edwards () for $6.8 billion. The deal would create one of the largest U.S. retail brokerages, and suggests more consolidation to come in the brokerage business.

Minneapolis-based payroll/payment processor Ceridian Corp. agreed to a $5.3 billion buyout offer from Thomas H. Lee Partners LP and Florida-based insurer Fidelity National Financial ().

A number of leading stocks made powerful moves in early trading.

Precision Castparts () gapped up, gaining 3.55 to 119.81. Debt rating agency Standard & Poor’s said Wednesday it would include the maker of specialized aerospace parts in its S&P 500 index. The 3% move pushed Precision shares to new highs on rising volume. The stock is now 11% extended above the 107.76 buy point on a recent pullback to its 50-day moving average line.

Google () rose 5.14 to 503.74. The dominant Internet search engine provider, its $3.1 billion acquisition of online advertising company DoubleClick is under review by the Federal Trade Commission, but most expect the deal to be approved. The stock’s 1% move follows two days of heavy-volume gains that broke it out of a consolidation begun in January. Shares remain 2% below the highs notched in January.

China Petroleum & Chemical () gapped up, adding 6.30 to 109.69. China’s largest refiner, also known as Sinopec, broke out of an 18-week, cup-with-handle base early in May. It’s now 16% above the 94.88 buypoint.

for an archive of Cramer’s “Mad Money” recaps.

While Brazil, Russia, India and China, also known as BRIC, is still in its prime, it’s time to retire the investing strategy, Jim Cramer told viewers of his “Mad Money” TV show Wednesday.

Market players still need to have foreign exposure, but “BRIC just doesn’t cut it anymore,” he said. The rest of the world, or ROW, as Cramer calls it, is better than BRIC.

For a while BRIC was “it” because two things happened, he said. First, the U.S. government “betrayed its rapacious capital principles,” hiking short-term interest rates several consecutive times. And second, “housing fell off a cliff,” Cramer said.

These factors made for an ailing U.S. economy but made BRIC look hot, he said. However, as “investors ran into the arms of BRIC,” it was not able to contain the heat. As a result, growth started sprouting up in ROW, Cramer explained.

“I’ve scoured the country for industrial stocks that get close to half of their sales from ROW” and come up with three stocks that “could serve as paradigms that people should want to own now,” he said. These are the stocks Cramer believes are no longer “held hostage by the U.S. economy.” Catch Caterpillar

Cramer’s No. 3 ROW pick, he said, is Caterpillar (CAT) , an “all-American company” that gets 48% of its sales from the rest of the world. In addition, more than half of Caterpillar’s manufacturing plants are in the ROW, too, Cramer said.

“It is cyclical, but not totally levered to the U.S.,” he said. “It is the year people will recognize that Caterpillar is more than a housing play.”

“The U.S. is just not where the action is,” Cramer continued. “The whole world is growing … and leaving the U.S. behind.”

That’s why a company like Caterpillar is worth “snagging a piece of,” he said.

DuPont’s a Do

Another U.S. company that has made itself an international player is Cramer’s No. 2 ROWer — DuPont (DD) , the “big daddy chemical company.”

In the fourth quarter of 2006, 65% of DuPont’s business came from ROW, Cramer said.

“I don’t want anything industrial that doesn’t have international exposure,” he said. But beyond international diversification, DuPont is a big consumer of oil, which means it is going to be the “biggest beneficiary” of the year-over-year decline in oil prices, Cramer said.

And the real kicker here is the company’s agricultural growth, he noted. Plus, DuPont is also a member of the “global agricultural oligopoly.”

DuPont has “gone global,” and as “we want American companies to have as little American exposure as possible” until the Fed starts cutting interest rates, it is Cramer’s second ROW pick. United Tech Retake

Cramer’s top Rest of World pick is United Technologies (UTX) .

The company, with roughly 60% of its revenue coming from outside the U.S., “has all the glorious ROW that we need,” he said. While the stock is now clearly in the house of pleasure, there was a time when Cramer went negative on it. For that, said Cramer, United Tech CEO George David made fun of him, and “man was he right” to do so.

When a stock publicly humiliates him, skyrocketing after he goes bearish on it, people should know it’s a “real winner,” Cramer said.

United Technologies has “great management” and a “phenomenal” aerospace business, which is a huge driver of its international growth, he said. But what Cramer really likes about the company is that United Tech realized it had to diversify away from America and migrate to the rest of the world.

“It didn’t want to be held hostage by the Fed,” he said.

With United Tech we are moving away from a company like Whirlpool (WHR) , which has way too much exposure to the U.S., and moving towards a company like Emulex (ELX) , a stock that is not levered to the U.S. and is up huge, Cramer said.

When Cramer bet against United Tech, he lost. After he sold it from his Action Alerts PLUS charitable trust, he momentarily looked like a genius as United Tech went down 3 points, he said. But now it is selling “well above the place” where Cramer sold it and he is determined not to make the same mistake twice with this stock.

Mad Mail & Sudden Death

In the show’s “Mad Mail” segment, Cramer told a viewer Viacom (VIAB) “was run like a country club” with too many people working there. He believes people will not miss the 250 workers recently fired from MTV when it comes to Viacom “reporting decent, profitable quarters.”

Responding to another mailer, Cramer said that while Microsoft (MSFT) has given its shareholders a special dividend and had a buyback, it is big company so it is difficult to move its price.

During the “Sudden Death” round, Cramer was bullish on Sun Microsystems (SUNW) . He was bearish on Teva Pharmaceutical (TEVA) and Novastar (NFI) . Lightning Round

Cramer was bullish on Qualcomm (QCOM) , Transocean (RIG) , Melco PBL Entertainment (MPEL) , C.H. Robinson Worldwide (CHRW) , Halliburton (HAL) , Goldman Sachs (GS) , Sears (SHLD) and Thermo Fisher Scientific (TMO) .

Cramer was bearish on BJ Services (BJS) , Hudson City Bancorp (HCBK) , Expeditors International of Washington (EXPD) , NutriSystem (NTRI) and Fortress (FIG) .

For more of Cramer’s insights during the Lightning Round, click here.

Want more Cramer? Check out Jim’s rules and commandments for investing from his popular book by http://www.thestreet.com/tsc/cramerbook.