Stocks edge up Friday, but post weekly losses
NEW YORK — 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 Standard & Poor’s 500 index gained 4.24 points, or 0.3 percent, to end at 1,592.43. It fell 2.1 percent for the week.
The Dow Jones industrial average rose 41.08 points, or 0.3 percent, to 14,799.40, leaving it down 1.8 percent for the week.
The Nasdaq composite fell 7.39 points, or 0.2 percent, to end at 3,357.25, leaving it with a weekly loss of 1.9 percent. The tech-heavy index was hurt by a 9.3 percent drop in shares of Oracle Corp. The tech bellwether delivered a disappointing quarterly earnings report late Thursday.
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 post 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 about 560 points or 3.66 percent — 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 — which surged to 2.54 percent on Friday, its highest level since August 2011 — is providing a head wind for stocks, according to Bruce Bittles, chief investment strategist at Robert W. Baird & Co. He said 2.5 percent is a key level that could hamper the market
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 percent 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. rose 2.6 percent 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 percent to 280.40, its lowest closing level of the year. For the week, the index declined 3.7 percent.
Gold for August delivery rose $5.80 on Friday to close at $1,292 an ounce on the New York Mercantile Exchange.
Crude oil for August delivery fell $1.45 to end at $93.69 a barrel on Nymex.
On Thursday, the Dow dived 354 points, or 2.3 percent, 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, 2011. Gold and oil prices also tumbled, while the dollar and the 10-year Treasury yield jumped.
Visit MarketWatch at www.marketwatch.com
Distributed by MCT Information Services
VIDEO: Through a partnership between MCT and NewsLook, we can offer you video to go with this story. Use of this video is free to MCT clients. If you have questions or comments about this partnership, feel free to contact us at email@example.com.
—If stocks rally, sell, trader advises
Get embed code: http://goo.gl/uItdF
—What to watch for in next week’s markets
Get embed code: http://goo.gl/xRqdF