Stocks stumble lower after early dive
The Dow falls more than 150 points, but clear bargain-hunting cuts the loss by about half. J.C. Penney slumps as a board fight gets ugly. Crude oil rises.
Stocks ended Friday lower but were well off their lows of the day as August, often one of the market's worst months of the year, began to spread its weird magic.
The declines were big enough that the market ended the week lower with the Dow Jones industrials ($INDU) showing a weekly loss after six weeks of gains.
The Dow was down as many as 152 points before bargain-hunters began to buy. The blue chips ended the day off 73 points to 15,426.
The Standard & Poor's 500 Index ($INX) was off 6 points to 1,691 after falling by as many as 11 points. The Nasdaq Composite Index ($COMPX), down 9 points to 3,660, had slid as many as 19 points early in the session.
The Dow fell 1.5% on the week, its first loss since the week ending June 14. The S&P 500 dropped 1.1%. The Nasdaq lost 0.8%.
For the year, the Dow is still up 17.7%, with the S&P 500 up 18.6% and the Nasdaq up 21.2%. That's up from an 8.1% gain for the Dow at this time in 2012, a gain of 11.8% for the S&P 500 and a 16% gain for the Nasdaq.
There were a host of issues weighing on stocks on Friday, including:
1,700 is a big problem for the S&P 500. The index closed above 1,700 on Aug. 1 but fell back on Tuesday -- after just three days. The index spent the latter part of July flirting with 1,700. Behavior like that suggests that small rallies also generate quick sell responses. They also suggest a market that could be topping.
Wall Street is obsessed with what the Federal Reserve will do in September. The central bank's policy-making body, the Federal Open Market Committee, meets Sept. 17-18, and many on Wall Street expect the Fed to announce it's trimming back its $85-billion-a-month bond buying program. The fear is that interest rates will rise and markets will turn lower in response. That's the fear. The reality is that 10-year Treasury, from which mortgage rates are derived, hit a peak of 2.74% at the end of last week and dropped back to 2.58% on Friday.
The Japanese yen is rising. A rising yen has tended to weigh on U.S. stocks, as my colleague Anthony Mirhaydari noted on Wednesday. The yen is up nearly 2.5% against the dollar this week.
The stock market has moved too far too fast. The S&P 500 is up 150% since the March 2009 market bottom. (The Dow is up 136.6%, with the Nasdaq up 188.5%.) Yes, there have been regular -- and sometimes nasty -- pullbacks during this run-up, but the market has consistently recovered and pushed higher. Worriers think maybe the streak will be broken.
Is the market in danger of collapsing? Not yet. True, only four of the Dow stocks were showing gains, led by Alcoa (AA), up 31 cents to $8.22. However, a touch less than half of the stocks in the S&P 500 were higher, led by iron-ore producer Cliffs Natural Resources (CLF), up $2.34 to $24.35; coal producer Peabody Energy (BTU), up $1.30 to $17.90; and audio company Harman International (HAR), up $3.89 to $68.79.
Cliffs Natural Resources rallied along with metals generally after Chinese industrial output expanded faster than expected.
A little less than half of the stocks in the Nasdaq-100 Index ($NDX) were higher. The index was down 12 points to 3,119; most of that loss was due to Apple (AAPL), down $6.56 to $454.45. The leaders were travel booking company Priceline.com (PCLN), up $36.14 to $969.89, and Amazon.com (AMZN), up $1.52 to $297.26.
Gap (GPS) was off $1.27 to $44.25. The company said July same-store sales rose less than expected.
J.C. Penney (JCP) fell 78 cents to $12.88 as a battle over who should lead the company began to look like a mud-wrestling match. The retailer's largest shareholder, Bill Ackman's Pershing Square Capital Management, wants interim CEO Mike Ullman replaced now, along with Chairman Thomas Engibous. Ackman wants Allen Questrom, a former Penney chief executive and longtime retailing executive, to be the CEO.
Crude oil (-CL) in New York settled up $2.57 to $105.97 a barrel. Gold (-GC) was up $2.30 to $1,312.20 an ounce.
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