NEW YORK: US stocks fell on Friday after dour earnings news, while bonds declined for the third straight day on lingering disappointment over the Federal Reserve’s quarter-point interest-rate cut this week.
Oil prices rose as a strike looming in Nigeria next week threatened to disrupt the African country’s oil supplies.
Investors took a breather from a three-month rally, with stocks registering their first down week in five.
The Dow Jones industrial average DJI fell 89.99 points, or 0.99%, to 8,989.05, while the broader Standard & Poor’s 500 Index ended down 9.60 points, or 0.97%, at 976.22. The tech-laced Nasdaq Composite Index lost 8.75 points, or 0.54%, at 1,625.26, based on the latest available data.
The S&P 500 index is up about 15% since March 31, putting it on track to post its best quarterly performance since 1998.
For the week, the Dow fell 2.3%, the Nasdaq shed 1.2% and the S&P 500 declined 1.96%.
Nike Inc, the world’s largest maker or sports shows, said profits rose 18%, but its results fell short of forecasts. Nike, whose shares slumped US$3.85, or 6.8%, to US$53.08, also reported weak US orders.
Part of Friday’s volatility was due to money managers adjusting their portfolios before the quarter ends on Monday by selling stocks that have fallen and buying ones that have gained, a practice known as “window dressing,” traders said.
The Dow and the S&P 500 had their first losing week in five after the Fed cut interest rates on Wednesday in a bid to spark the sluggish economy.
The quarter-point rate cut was less aggressive than some investors had hoped, and they were also alarmed by the US central bank's warning of the possibility of earnings-eroding deflation.
“We are in a little bit of a resting period ahead of what will be a busy earnings season in a couple of weeks,” said Peter Boockvar, equity strategist at Miller Tabak & Co.
US Treasuries ended a brutal week in which yields have climbed as market hopes for an ultra-aggressive Fed easing were disappointed.
“Perhaps we are crying over spilled milk, but to us the Fed's modest cut is both a tactical and a strategic error,” said Ethan Harris, senior economist at Lehman Brothers, in a note entitled “The Mouse That Roared.”
At the 5pm close in New York, the 30-year bond shed 11/32 to 112-10/32, pushing its yield up to 4.59% from 4.55% late Thursday and 4.30% mid-week.
The benchmark 10-year note was unchanged at 100-21/32 in price, with its yield steady at 3.55%, up from 3.20% just before the Fed’s cut.
The two-year note edged up 3/32 to 99-17/32 while its yield dropped to 1.36% from 1.40% at Thursday’s close.
The dollar notched limited gains against the yen but lost ground to the euro even after an upbeat June consumer sentiment survey, with trading dominated by end-of-quarter positioning.
The euro gained slightly against the dollar and yen, but surged against sterling after a report showed Britain’s economy expanded at its weakest pace in 11 years in the first quarter as businesses and consumers retrenched before the Iraq war.
In late trading, the euro fetched US$1.1429, up from 1.1421 at Thursday’s New York close. The dollar traded at 119.54 yen, up from 119.37 yen the previous day.
On the New York Mercantile Exchange, US light crude for August gained 26 cents to settle at US$29.27 a barrel.
Gold prices recovered from a new seven-week low and disappointment over Wednesday's smaller-than-hoped-for US interest-rate cut.
On the Commodity Exchange, gold for August delivery closed up US$1.30 at US$345.50 an ounce. It traded up from US$343.30, its lowest since May 8, to US$346.00, after falling US$5.40 on Thursday.
European shares closed flat, kept above water by Dutch insurer Aegon and Philips Electronics, but doubts remained over whether the patchy economy can support the recent hefty rally in stocks.
The FTSE Eurotop 300 index of pan-European blue chips closed flat at 859.73 points, down 2% for the week, and near breakeven for the year.
In Tokyo, the Nikkei share average rose more than 2% on Friday as investors snapped up shares of Fujitsu Ltd and other high-tech exporters.
The Nikkei ended up 2.02% at 9,104.06, while the broader TOPIX index gained 1.71% to 903.06. – Reuters