Stocks Slide on Profit Taking
Stocks slid Friday, sending the blue-chip Standard & Poor’s 500 index to its first weekly loss in more than a month, as investors locked in profits on the next-to-last trading day of the second quarter and sized up the latest batch of mixed economic data.
The benchmark S&P; is up 15.1% since March 31, on pace for its best quarter since the last three months of 1998, when it surged 20.9%.
“This is a normal pullback considering the strong rally of the last three months,” said Kevin Marder, strategist at Ladenburg Thalmann Asset Management in Los Angeles, referring to the S&P;’s 2% loss this week after four weeks of gains.
“The economic data shows encouraging signs,” Marder said, “but at some point all the good news is baked into the cake.”
Treasury yields stabilized Friday after soaring for two days on speculation that the Federal Reserve’s 2 1/2-year program of cutting interest rates is over. The Fed trimmed its key short-term lending rate by a quarter-point Wednesday, to the dismay of some investors who had hoped for a bolder stroke.
The yield on the benchmark 10-year T-note was unchanged at 3.54%. The benchmark yield closed at 3.31% on Tuesday.
“Everybody is keeping a close watch on the Treasury market,” said analyst Ed Allen at TradingMarkets.com in Los Angeles.
“If yields were to rise too quickly, that would cut off the lifeline to the economy,” he said, noting that mortgage refinancing activity has helped buoy consumer spending.
On Wall Street on Friday, the Dow Jones industrial average shed 89.99 points, or 1%, to 8,989.05. The broader S&P; 500 slipped 9.60 points, or 1%, to 976.22, and the technology-heavy Nasdaq composite index sank 8.75 points, or 0.5%, to 1,625.26.
Losers beat winners by 7 to 6 on the New York Stock Exchange and Nasdaq. Volume was light, indicating buyer apathy more than a selling stampede.
For the week, the Dow lost 2.3%, also snapping a four-week winning streak, and Nasdaq dropped 1.2%.
In Friday’s economic news, the final consumer confidence index reading for June was better than expected but fell to 89.7, from 92.1 in May. Personal income in May rose 0.3%, matching expectations, while personal spending inched up a mildly disappointing 0.1%.
Strategists said next week’s economic data could offer better clues about the state of the recovery. The Institute for Supply Management’s June manufacturing report, due out Tuesday, and the Labor Department’s update Thursday of jobless claims will bear watching as “forward-looking indicators,” Marder said.
In other highlights:
* The drug sector was weak as Merrill Lynch downgraded Eli Lilly and Moody’s Investors Service said it might cut Abbott Laboratories’ credit rating. Eli Lilly lost $1.41 to $68.12, Abbott Labs dropped $1.22 to $43.60 and Pfizer shed $1 to $35.
* Phone giant SBC Communications fell 59 cents to $25.44 despite declaring an extra cash dividend of 10 cents a share, in addition to its regular quarterly dividend of 28.25 cents.
* Circuit City Stores rose 21 cents to $8.87. The retailer recorded the biggest advance in the S&P; 500 this week after Mexican billionaire Carlos Slim made a $1.5-billion offer to buy the firm. Its shares jumped 18% for the week even though the offer was rejected as too low.
* Medical device maker Guidant rallied $1.08 to $44.51 after saying second-quarter sales may exceed estimates.
* Japan’s Nikkei 225 index surged 2%, while European indexes were mixed. The Nikkei has soared 20% since late April.
