U.S. Stock Indexes End With Daily Losses, Monthly Gains

NEW YORK (MarketWatch) -- U.S. stocks on Friday closed mildly lower, but with the major indexes netting monthly, quarterly and year-to-date gains, after a slew of economic data fell largely in line with expectations and investors looking for clues as to whether the Federal Reserve would cut interest rates again next month.

"The Fed speakers could move the needle a whole lot more than the economic data stream today; we're trying to read the tea leaves of what they're going to do on Halloween -- will it be a trick or a treat?" said Art Hogan, chief market strategist at Jefferies & Co.

The Dow Jones Industrial Average shed 17.3 points to close at 13,895.6, with 15 of its 30 components closing lower. Yet the Dow settled 4% higher on the month, 3.6% for the quarter and 11.5% year-to-date.

The S&P 500 fell 4.63 points to close at 1,526.75, finishing with a monthly gain of 3.6%, a quarterly advance of 1.5%, and a year-to-date rise of 7.6%.

The Nasdaq Composite declined 8.09 points to 2,701.50, closing 4% ahead for September, 3.8% for the quarter and a year-to-date advance of 3.8%.

The financial sector was among those hit, with the Amex Broker Dealer Index off 0.5% and the Philadelphia KBW Bank Index slipping 0.9%.

Volume on the New York Stock Exchange topped 1.3 billion, and declining stocks outran advancers 9 to 7. On the Nasdaq, 1.9 billion shares traded hands, and declining issues passed those advancing by a count of roughly 3 to 2.

On the New York Mercantile Exchange, crude-oil futures fell after rallying within reach of a record high above $83 a barrel, with crude for November delivery sinking $1.22, or 1.5%, to end at $81.66 a barrel. .

Fed talk, data

Ahead of the open, the Commerce Department reported the largest monthly increase in consumer spending in two years, with core inflation retreating the most in three years. .

In a later report, the Commerce Department reported spending on nonresidential construction projects jumped 2.3% in August, offsetting the 18th consecutive decline in spending on housing.

Later data also included a slight weakening in consumer sentiment in late September, as worries about the slumping housing market climbed, according to a monthly survey conducted by Reuters and the University of Michigan. .

The day also included speeches from Federal Reserve officials, with Atlanta Federal Reserve President Dennis Lockhart telling an audience at Middle Tennessee State University that the housing market may not bottom out until the second half of 2008 or later.

Alan Greenspan also helped rattle investor nerves in telling the BBC in an interview Friday that he's increasingly pessimistic about the global economy, although still believes chances of a recession remain less than 50-50.

Also casting a more bearish view was Goldman Sachs' chief economist Jim O'Neill, who wrote in a note that signs of weakness have emerged in the U.S. labor market. Chances of Japan relapsing into an outright recession have climbed to two in three, O'Neill said.

Active issues

Shares of 3Com Corp. climbed 34% after the network equipment maker agreed to be acquired by Bain Capital Partners LLC and Huawei Technologies Co., for $2.2 billion in cash.

Alcatel-Lucent rose 4.4% after reports the telecommunications-equipment giant's CEO had been given a month to devise an emergency restructuring plan.

In broker news, Deutsche Bank upgraded Luminent Mortgage Cap Inc. to hold from sell, saying the company's portfolio is showing signs of stabilization. Its stock closed with a gain of 10.6%.

On the earnings front, Accenture Ltd reported an 8.6% decline in fourth-quarter profits, but still beat street expectations. Its stock gained 5.9%.

Engineering construction firm Shaw Group Inc. fell 0.1% after it tallied second-quarter net losses of $62.6 million, or 78 cents a share, from net incomof $21.8 million, or 26 cents a share, a year ago.

Other markets

The dollar fell across the board, sinking to another fresh low against the euro, as the tame inflation data renewed thoughts the Fed would cut interest rates. .

Gold futures rallied to a 27-year high, as the dollar's tumble against other major currencies boosted demand for the precious metal. Gold futures for December delivery climbed $10.10, or 1.5%, to end at $750 an ounce. .

Treasury prices climbed, with the benchmark 10-year note up 7/32 at 101 7/32, its yield falling to 4.592%.

Overseas, European stocks looked to end on a mixed note, amid some better-than-expected U.S. data and gains from Alcatel-Lucent helping offset some declines in the food sector. .

In Sydney and Shanghai, indexes ended at record highs, while shares in Hong Kong, Singapore and Mumbai touched lifetime highs during the session. .

By Kate Gibson