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Futures Shave Some Gains on GDP Letdown

Stock index futures pared gains and indicated a flat open as the economy expanded a bit less than expected in the first quarter.

The government said gross domestic product grew 3.2 percent, a shade under forecasts and well below the fourth-quarter growth of 5.6 percent. Following the report's release Standard & Poor's 500 futures drifted to near breakeven levels though Dow futures remained in positive territory.

"The key here obviously is the return of the consumer. The economy is poised to continue to grow," said Peter Cardillo, chief economist at Avalon Partners in New York. Cardillo had been forecasting a 3.75 percent GDP number but said the gains are still evidence that the economy is unlikely to re-enter a recession.

"The consumer is picking up the slack," he said. "The recovery is for real."

In earnings news, oil giant Chevron easily beat forecasts with $2.27 a share versus expectations of $1.94, but fell short on revenue. Shares of the Dow component edged lower premarket.

Futures had been higher earlier on hopes for a breakthrough in the Greek debt crisis.

In the banking sector, prosecutors are opening a preliminary investigationinto trading at Goldman Sachs .

The bank has denied any wrongdoing in the case of the Securities and Exchange Commission's charge with fraud over a debt instrument it sold to investors. Shares fell 3 percent in premarket trading.

On the economic front, investors expect the advanced reading of gross domestic product data for the first quarter, due to be released at 8:30 am New York time. Economic growth is likely to have slowed down to an annual rate of 3.4 percent in the first quarter, compared with the 5.6 percent growth rate in the fourth quarter, according to a survey of economists by Reuters.

In the latest news from Greece, a European Commission spokesman said discussions over a rescue plan are likely to wrap up Saturday. A complete fiscal overhaul is likely for the nation. At the same time, Moody's downgraded its ratings on nine Greek banks.

BP remains mired in cleaning up the massive oil spill on the Mississippi River, but investors were looking for bargains in the company's stock price, which fell 12 percent since the disaster began. Analysts said the drop represents a buying opportunity, and BP rose 1.3 percent premarket.

Asian shares closed higher while European shares were largely flat in mid-morning trading.

U.S. futures regulators fined three financial services companies for irregularities, the Commodity Futures Trading Commission announced lat Thursday.

Morgan Stanley was fined $14 million for failing to report a big-block oil trade and UBS Securities was fined $200,000 in the same case. Moore Capital was handed a fine of $25 million for attempting to manipulate palladium and platinum futures.

In merger and acquisition news, UAL's United Airlines and Continental Airlines are likely to announce a merger Monday that would create the world's biggest airline. UAL shares gained 2.3 percent before the bell.