Stocks end Fed-driven week with a thud
NEW YORK (MarketWatch) — U.S. stocks fell hard on Friday, but benchmark indexes still managed to post a third week of gains as investors reacted to the uncertain science of reading verbal signals from U.S. central bankers.
The selloff intensified in the last few minutes of trading. Volatility was expected to be high Friday due to an options expiration known as quadruple witching taking place.
The Dow Jones industrial average and the Standard & Poor's 500 index both fell for a second session, retreating from the record heights that came Wednesday after the Federal Reserve unexpectedly said it would refrain from curbing stimulus for now. On Monday, stocks rallied in the wake of former Treasury Secretary Larry Summers pulling his name out of contention to replace Ben Bernanke as chairman of the Federal Reserve.
The final trading session of the week had one Federal Open Market Committee member signaling the Fed could curb stimulus next month and another critical of the decision not to taper in September.
It has been a "big week if you're a Fed watcher; between Larry Summers and the FOMC meeting, the market was caught off guard," said Richard Slinn, co-head of investments for Northern California at JPMorgan Private Bank.
In its worst session in more than a month, the Dow Jones industrial average fell 185.46 points, or 1.2 percent, to 15,451.09, leaving it up 0.5 percent on the week.
Aluminum-producer Alcoa Inc. was among decliners among the Dow's 30 components, its shares down 1.8 percent on its final day of trading as a blue chip.
Alcoa, Hewlett-Packard Co. and Bank of America Corp. will no longer be part of the Dow 30 when trading begins Monday, replaced by Goldman Sachs Group Inc., Visa Inc. and Nike Inc.
Another Dow component, Caterpillar Inc., fell 3.4 percent after the heavy-equipment maker in a regulatory filing reported a decline in retail sales.
The S&P 500 index dropped 12.43 points, or 0.7 percent, to 1,709.91. It's up 1.3 percent for the week.
Despite the volatile week, the month is shaping up to be the fifth best September ever for stocks, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
After a halt in trading pending news, shares of Blackberry Ltd. fell 17 percent after the Canadian smartphone maker said it would lay off 40 percent of its global workforce and reported a nearly $1 billion second-quarter loss in an unexpected early release of its results.
The Nasdaq composite shed 14.66 points, or 0.4 percent, to 3,774.73, up 1.4 percent from the week-ago close.
Apple Inc. shares fell 1 percent as long lines formed at the iPhone maker's retail stores around the globe, with the latest models of its handsets on sale, starting Friday.
AK Steel Holding Corp. declined 8 percent after warning of a wider-than-expected third-quarter loss.
Interviewed Friday on Bloomberg Television, Federal Reserve Bank of St. Louis President James Bullard said the decision not to begin tapering followed weaker economic data, and that a small taper could start in October. Stock futures fell after he spoke.
At a business luncheon in New York, Bullard said tapering is more likely if the labor market continues to improve.
Kansas City Fed President Esther George on Friday said markets were ready for reduced stimulus to begin, and the central bank's failure to follow through on expectations hurt its credibility on Wall Street.
Crude-oil futures lost $1.72, or 1.6 percent, to $104.67 a barrel, and gold futures dropped $36.80, or 2.7 percent, to $1,332.50 an ounce on the New York Mercantile Exchange.
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