By Dan Strumpf
U.S. stocks dropped on Friday, pressured by a selloff in the
health-care sector, but major equity indexes still posted solid
weekly gains.
The S&P 500 index fell 5.49 points, or 0.3%, to end at
1866.52, after rising to an intraday record of 1884 early in the
session.
The Dow Jones Industrial Average fell 28.28 points, or 0.2%, to
finish at 16302.77, leaving it with a weekly gain of 1.5%.
The Nasdaq Composite Index slid 42.50 points, or 1%, to 4276.79,
weighed down by a selloff in health-care stocks and heavy losses in
shares of Symantec.
Equities ended a positive, if volatile, week. They dropped
Wednesday after comments from Federal Reserve Chairwoman Janet
Yellen sparked fears that higher interest rates were on the
horizon. But upbeat economic news helped ease investors' concerns
and sent the S&P 500 up 1.4% for this week.
"It has been a good week for the market," said Paul Zemsky,
chief investment officer for multi-asset strategies at ING
Investment Management. "Overall the economic data in the U.S. was
pretty good and went a long way to convincing traders that the
slowdown we saw [earlier in the year] was weather related."
On Friday, stocks began the session higher, but turned lower
midday amid a selloff in health-care stocks. The catalyst was a
letter of complaint from three members of Congress about the high
prices of a Gilead Sciences hepatitis C drug. News of the letter
sent Gilead shares sliding 4.6%, dragging other biotech companies
with it.
Financial stocks, however, held on to positive territory after
the Federal Reserve announced that 29 out of the nation's 30
biggest banks passed "stress tests" designed to measure their
ability to withstand a severe economic downturn. The approvals
potentially clear the way for many of the banks to reward investors
with higher dividends and share buybacks.
The rebound in stocks this week was powered by positive economic
data. The S&P 500 index advanced 0.6% on Thursday after the
Philadelphia Federal Reserve's manufacturing-activity index for
March topped expectations. That report and others have given
investors assurances that weaker reports earlier in the year were
distorted by harsh winter weather.
"We're shaking off the deleterious effects of the weather and
the economy's starting to improve," said Phil Orlando, chief equity
strategist at Federated Investors, which manages about $400
billion.
Mr. Orlando said he is favoring corners of the market that
benefit from a pickup in the economy, including consumer
discretionary, financial and technology stocks. "We think there is
tremendous pent-up demand."
Meanwhile, many investors appeared to reassess comments made by
Chairwoman Yellen on Wednesday. In addition to announcing a further
wind-down, or "taper," of the central bank's stimulus program, the
new Fed chief said the central bank could raise rates "somewhere on
the order of six months" after it winds down its stimulus program.
Investors read in the remarks the possibility that rate increases
could come as early as April next year, rather than later in 2015
as many had expected.
Michael Fredericks, portfolio manager of BlackRock's
$6.6-billion Multi-Asset Income Fund, said investors should be
encouraged by the Fed's comments earlier this week. "For the more
intermediate or longer term, you have to view this as a positive
that the Fed thinks the economy is healthy enough not only to
withstand more taper, but also that the fed funds rate is going to
be higher a little bit sooner than they thought," he said.
Keith Bliss, senior vice president at brokerage Cuttone &
Co., said volumes were relatively quiet, though they picked up
later in the session. "My sense in talking to clients [...] is
people are pretty comfortable with where the market is right
now."
Friday marked what traders refer to as "quadruple witching," the
simultaneous expiration of futures and options on indexes and
individual stocks. The phenomenon typically leads to a ramp-up in
volume during the final hour of trading, as investors and dealers
move to close out or roll over positions ahead of expiration.
The yield on the 10-year Treasury note was lower at 2.748% from
2.775% late on Thursday.
Gold futures gained 0.4% to $1336 an ounce, snapping a four-day
losing streak, while crude-oil futures added 0.6% to $99.46 a
barrel.
The dollar lost some ground against the euro and the yen.
The Stoxx Europe 600 rose 0.1% and was up 1.8% on the week after
slumping 4.7% over the previous two weeks. Germany's DAX 30 index
advanced 0.5% and gained 3.2% on the week.
Tensions over Ukraine continued to punish Russian markets. The
country's Micex index fell 1% in response to a second round of U.S.
sanctions.
Fitch Ratings cut its outlook on Russia's sovereign debt, which
is currently rated two notches above junk status at triple-B, to
negative from stable. That followed a similar move by Standard
& Poor's on Thursday.
Asian markets rose, with China's Shanghai Composite running up
2.7% on expectations that fundraising regulations for property
developers will be loosened further. Japan's market was closed for
a holiday.
Zions Bancorp. fell 5.3%. The regional lender was the only one
of the 30 institutions surveyed that fell short of the Fed's stress
test.
Dow component Nike Inc. fell 5.1% after the sporting-gear
company said it expected next fiscal-year's earnings to rise less
than current projections, which overshadowed better-than-expected
fiscal third-quarter earnings and revenue.
Symantec slid 12.9% after the software company announced the
termination of Steve Bennett as its chief executive officer after
fewer than two years on the job. The company named board member
Michael Brown as the interim CEO. Symantec affirmed its fiscal
fourth-quarter earnings and revenue outlook.
Tiffany & Co. fell 0.5% as investors shrugged off the
high-end jewelry retailer's disappointing fourth-quarter earnings
report. The company also announced a new $300 million stock buyback
program.
Ann Inc. surged 14.1% after private-equity firm Golden Gate
Capital disclosed a 9.5% stake in the retailer, which operates Ann
Taylor and Loft branded stores.
Write to Dan Strumpf at daniel.strumpf@wsj.com