Stock prices sank Friday as investors sifted through a series of downbeat economic reports, but drug makers including Johnson & Johnson and Merck got a boost as Congress neared an agreement on Medicare prescription legislation. The market's three major indexes ended a choppy five days with declines for the week.
The economic reports included a drop in consumer spending, news of which followed a glum holiday season forecast from Wal-Mart Stores on Thursday, and an uptick in inflation at the wholesale level in October.
"Advance retail sales weren't so good," said Brian Williamson, an equity trader at the Boston Company Asset Management. "Retailers are a little worried about holiday shopping, they're worried about their profits, so this number confirmed what we saw yesterday."
The tech-laden Nasdaq composite index led the decline, falling 37.09 points, or 1.9%, to 1,930.26. The Dow Jones industrial average ended the day down 69.26 points, or 0.7%, at 9,768.68, and the Standard & Poor's 500 index lost 8.06 points, or 0.8%, at 1,050.35. Losers led winners by 2 to 1 on Nasdaq and by about 3 to 2 on the New York Stock Exchange in moderate trading.
This was the market's first down week in three. Stocks declined moderately four days out of five amid concerns about the economy, but advanced solidly on Wednesday during a brief burst of optimism about high-tech sales. For the week, the S&P; 500 lost 0.3%, the Dow fell 0.4% and Nasdaq dropped 2.1%.
A Commerce Department report Friday showed that Americans cut spending in October, depressing retail sales for a second month in a row. In another report, the Federal Reserve said industrial production rose less than expected in October.
Williamson said investors also were concerned that interest rates could go up faster than expected after a government report suggested inflation was on the rise. A turnaround in inflation could motivate the Fed to raise rates, although bond investors appeared to focus more on the tepid economic news. The yield on the benchmark 10-year Treasury note fell to 4.22% from Thursday's close of 4.29%.
Pharmaceutical stocks saw gains as congressional negotiations on a $400-billion Medicare drug plan appeared close to a conclusion. Johnson & Johnson ended the day up $2.02 at $52.12 and Merck was gained 78 cents at $46.58.
Gold, meanwhile, made a run at $400 but fell short, closing at $397.80, up $3.70 an ounce, in New York trading.
In other highlights:
* Among tech stocks, chipmaker Intel lost 98 cents to $32.80, and was the biggest drag on the S&P; 500. Applied Materials, the No. 1 maker of computer-chip production equipment, dropped $1.26 to $23.48. The company this week reported its first profit in a year and said orders this quarter would surge as customers upgraded plants to meet demand.
* In the retail sector, Bebe Stores jumped $2.10 to $27.36 after J.P. Morgan said the women's apparel retailer's sales and earnings would rise in the coming months. Wal-Mart fell for a third day, losing 52 cents to $55.
Market Roundup, C6-7