By Kate Gibson, MarketWatch
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 S&P 500 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 J.P. Morgan Private Bank. The bank oversees $910 billion in
assets.
The Fed's unexpected decision to hold off on reducing its $85
billion in monthly asset purchases was "aimed more at Main Street
than Wall Street," said Slinn, adding that the Fed wants to ensure
its "decisions don't risk the nascent recovery in the private
sector," given the potential impact of rising interest rates on the
housing and auto sectors.
In its worst session in more than a month, the Dow Jones
Industrial Average (DJI) fell 185.46 points, or 1.2%, to 15,451.09,
leaving it up 0.5% on the week.
Aluminum-producer Alcoa Inc. (AA) was one of the top three
decliners among the Dow's 30 components, its shares down 1.8% on
its final day of trading as a blue chip.
Alcoa, Hewlett-Packard Co. (HPQ) and Bank of America Corp. (BAC)
will no longer be part of the Dow 30 when trading begins Monday,
replaced by Goldman Sachs Group Inc.(GS), Visa Inc. (V) and Nike
Inc. (NKE).
Another Dow component, Caterpillar Inc. (CAT), fell 3.4% after
the heavy-equipment maker in a regulatory filing reported a decline
in retail sales.
The S&P 500 index (SPX) dropped 12.43 points, or 0.7%, to
1,709.91, with utilities losing the most of its 10 major sectors.
It's up 1.3% 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.
(RIMM) fell 17% after the Canadian smartphone maker said it would
layoff 40% of its global workforce and reported a nearly $1 billion
second-quarter loss in an unexpected early release of its
results.
The Nasdaq Composite (RIXF) shed 14.66 points, or 0.4%, to
3,774.73, up 1.4% from the week-ago close.
Apple Inc. (AAPL) shares fell 1% 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. (AKS) declined 8% after warning of a
wider-than-expected third-quarter loss.
For every stock rising, nearly three declined on the New York
Stock Exchange, where nearly 2.1 billion shares traded.
Composite volume topped 5 billion.
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. Read
about what some Fed watchers think.
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(CLV3) lost $1.72, or 1.6%, to $104.67 a barrel
and gold futures dropped $36.80, or 2.7%, to $1,332.50 an ounce on
the New York Mercantile Exchange.
The dollar (DXY) gained against the currencies of U.S. trading
partners, including the euro (EURUSD) but excluding the yen
(USDJPY)
Treasury prices rose, with the yield on the benchmark 10-year
note (10_YEAR) down 2 basis points at 2.734%.
A day after rallying to records on the FOMC decision not to
taper, U.S. stocks mostly fell Thursday in a consolidation of the
prior day's gains.
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