Stocks head lower at end of a volatile week
NEW YORK Tepid economic reports helped push the stock market lower on Friday as a turbulent week came to an end.
The Thomson Reuters/University of Michigan survey reported that consumer sentiment fell in June compared with the previous month, coming in lower than economists had expected. A measure of industrial production in the U.S. also fell short.
A report on the U.S. economy from the International Monetary Fund, a global lender, did little to help the mood. The IMF said U.S. government spending cuts that kicked in March 1 were "ill-designed" and would hurt economic growth.
The Dow Jones industrial dropped 115 points to 15,061 as of 1:45 p.m. ET. The Dow and other indexes flitted from slight gains to losses in morning trading, a contrast to the sudden lurches in previous days. All three major indexes are on track to lose 1 percent for the week.
Trading has been volatile since late May as traders try to figure out when the Federal Reserve will dial back its aggressive support for the U.S. economy. This week was no different: The Dow slumped a total of 243 points on Tuesday and Wednesday then jumped 180 points Thursday.
The Fed buys $85 billion in bonds every month as part of a campaign to keep interest rates extremely low. The aim is to encourage borrowing, spending and investing. Some investors worry that long-term interest rates could spike when the Fed pulls back, rattling lending markets that keep money flowing throughout the economy. Mortgage rates have already started climbing as yields on benchmark government bonds rise.
Policymakers at the Fed meet Tuesday and Wednesday to discuss the U.S. economy and the central bank's economic stimulus policies.
Scott King, senior fiduciary investment adviser at Unified Trust in Lexington, Kentucky, said that investors in recent weeks have been influenced more by wondering about what the Fed might do than by the underlying economy.
"You have a number of Fed governors saying the opposite to what (Fed Chairman Ben) Bernanke is saying," King said. "And that's made the markets more jittery."
King said investors were disappointed Friday by the drop in consumer confidence. He described the economy as "plodding along."
"Wage growth continues to be pretty meager, and unemployment continues to be lackluster," King said.
In other trading, the Standard & Poor's 500 index fell ten points to 1,626.
Banks led seven of the 10 industry groups in the S&P 500 lower. Utilities and health-care companies made slight gains. Investors tend to favor these safety plays when they want stable companies that pay high dividends.
The S&P 500 hit a record high of 1,669 on May 21. The next day, Fed officials said they would consider pulling back on their stimulus program once the economy looks healthy enough. The S&P has fallen 2 percent since then.
In other Friday trading, the Nasdaq composite index fell 23 points to 3,423.
The price of crude oil rose 96 cents, or 1 percent, to $97.65 a barrel, near its highest level of the year, as traders reacted to news that the U.S. would provide weapons to rebel forces in Syria.
Gold rose $9.70, or 0.7 percent, to $1,387 an ounce.
In the market for U.S. government bonds, the yield on the benchmark 10-year Treasury note dipped to 2.11 percent from 2.15 percent late Thursday. The yield reached a 14-month high on Tuesday of 2.29 percent. Expectations that the Fed will slow its bond purchases have helped push the yield up from 1.63 percent at the beginning of May, when it was at its lowest level this year.
Among stocks making big moves:
- Restoration Hardware jumped $10.72, or 18 percent, to $69.69. The high-end home products chain raised its forecast for full-year earnings late Thursday and announced plans to start two new businesses - RH Kitchen and Tableware and RH Antiquities - next year.
- Myriad Genetics sank $2.53, or 8 percent, to $29.48 a day after the Supreme Court gave the diagnostic test maker a partial victory in a battle over patents underlying its lucrative test for genes linked to increased risks for cancer.