By Polya Lesova and Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks eked out modest gains on
Friday, but posted losses for the week, which was dominated by
fears that the Federal Reserve may begin pulling back stimulus
later this year.
After a very choppy trading session, the S&P 500 index (SPX)
gained 4.24 points, or 0.3%, to end at 1,592.43. It fell 2.1% for
the week.
Eight of the S&P 500's 10 major sectors ended higher, with
consumer staples leading gainers and information technology leading
decliners.
The Dow Jones Industrial Average (DJI) rose 41.08 points, or
0.3%, to 14,799.40, leaving it down 1.8% for the week. This was the
Dow's worst week since the one ended on April 19.
Hewlett-Packard Co. (HPQ) was the top decliner, while Procter
& Gamble Co. (PG) was the top gainer in the Dow on Friday.
The Nasdaq Composite (RIXF) fell 7.39 points, or 0.2%, to end at
3,357.25, leaving it with a weekly loss of 1.9%. The tech-heavy
index was hurt by a 9.3% drop in shares of Oracle Corp. (ORCL). The
tech bellwether delivered a disappointing quarterly earnings report
late Thursday.
More than 2 billion shares traded on the New York Stock
Exchange. Composite volume topped 5.6 billion.
Friday was a quadruple-witching session, meaning expirations for
index futures, options on index futures, single-stock futures and
stock options. Such sessions can be the most heavily traded days of
the year.
Friday's gains came after The Wall Street Journal suggested that
investors may be misreading the Federal Reserve's message. Jon
Hilsenrath, the Journal's Fed watcher, wrote a blog saying that
markets may be overlooking several dovish signals sent by Fed
Chairman Ben Bernanke.
U.S. stocks, along with commodities and bonds, fell sharply in
the previous two sessions after Bernanke said in a news conference
Wednesday that the central bank may scale back its bond buying
later this year. While the Fed may do so, Hilsenrath wrote, it will
be a long time before the Fed raises short-term interest rates.
The Dow's slide on Wednesday and Thursday -- a drop of 560
points or 3.66% -- was its worst two-day drop since the two
sessions ended Nov. 1, 2011.
Investors also absorbed remarks from St. Louis Federal Reserve
President James Bullard, who explained on Friday why he voted
against the Fed decision. Bullard said the Fed's decision to lay
out its plans to taper bond buys was badly timed. The Fed should
have waited "for more tangible signs" of economic improvement and a
halt in the downward direction for inflation, according to
Bullard.
The rise in the 10-year Treasury yield(10_YEAR) -- which surged
to 2.53% on Friday, its highest level since August 2011 -- is
providing a headwind for stocks, according to Bruce Bittles, chief
investment strategist at Robert W. Baird & Co. He said 2.5% is
a key level. "If it breaks through there, I think the market will
really have some problems," he said.
Meanwhile, Goldman Sachs analysts said Friday in a note that
their top recommendation for 2013 is still to buy stocks and sell
bonds.
"We continue to expect the index will close the year at 1,750, a
rise of approximately 10% from today's level," the analysts wrote,
referring to the S&P 500 index. "However, median historical
drawdown episodes suggest at some point during the next six months
that the S&P 500 may decline to the mid-1,500s before
rebounding to our year-end target."
Jonathan Krinsky, chief technical strategist at Miller Tabak,
also sees potential support for the S&P 500 in the mid-1,500s.
"We have just broken the psychological 1,600 level after two prior
tests, which now creates short-term resistance in the 1,598 to
1,608 range," Krinsky wrote in a note.
"There should be downside support in the 1,550-1,575 area, which
marked major resistance over the last decade."
Shares of Facebook Inc. (FB) rose 2.6% after UBS analysts
upgraded the social-network company to a buy rating, citing new
monetization efforts and higher advertising revenue.
In Asia on Friday, stocks in Shanghai and Hong Kong ended lower,
but Japanese stocks advanced. European stocks dropped, with the
Stoxx Europe 600 index falling 1.2% to 280.40, its lowest closing
level of the year. For the week, the index declined 3.7%.
Gold for August delivery(GCQ3) rose $5.80 on Friday to close at
$1,292 an ounce on the New York Mercantile Exchange, but posted a
weekly loss of $95.60 an ounce.
Crude oil for August delivery(CLQ3) fell $1.45 to end at $93.69
a barrel on Nymex, leaving it with a weekly loss of $4.38 for the
week.
On Thursday, the Dow dived 354 points, or 2.3%, representing its
largest one-day percentage decline since Nov. 7, the day after the
U.S. election, and its largest one-day points drop since Nov. 9,
2.4011. Gold and oil prices also tumbled, while the dollar and the
10-year Treasury yield jumped.
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