The Week on Wall Street: More Pain
Stocks ended a volatile week with a late selloff, erasing any hope for a quick recovery from last week's trouncing.
The Dow Jones Industrial Average posted a weekly loss of 0.6%, the S&P 500 ended down 1.8% and the Nasdaq Composite dropped 2.0%.
For the year, the Dow remains up 5.9%, the S&P is up 1.0%, while the Nasdaq has gained 4.0%.
Stocks ended Monday higher as a rebound in financial stocks lifted the S&P 500 1%.
Some market strategists remained pessimistic on U.S. stocks given concerns about the credit markets.
"I'd say we've hit a short-term peak," said Vince Farrell, managing director at Scotsman Capital Management. "I don't think we'll go back to a new high this year only because it's going to take a while to find out exactly what the damage to the credit markets is."
Dow component Verizon Communications said second-quarter profit rose, helped by growth in wireless and high-speed Internet subscribers. The No. 2 U.S. phone company said net profit rose to 58 cents a share, in line with expectations.
Stocks closed broadly lower on Tuesday after a mortgage lender said it was unable to borrow money and crude oil closed above $78 a barrel for the first time.
Shares of troubled lender American Home Mortgage opened sharply lower Tuesday afternoon after trading in the stock was halted Monday. The company said it can no longer provide funding for home loans.
Tech shares were weak as Apple closed lower amid rumors about a cut in the production of iPhones.
Tuesday's reversed from earlier gains made on tame inflation data and solid earnings reports from General Motors and Sun Microsystems.
Stocks closed higher on Wednesday and the Dow saw triple-digit gains as bargain hunters snapped up beaten down shares.
"At some point we have to look at the recent downturn as being slightly overdone," said Art Hogan, managing director at Jefferies. "We're in this tug of war between trading in fear and trading in greed and greed won out today."
Merck was the best percentage gainer on the Dow after a New Jersey court ruled Tuesday that English and Welsh patients cannot sue the company for health problems related to their use of the painkiller Vioxx.
Homebuilders sold off hard and Beazer Homes fell as much as 42% on bankruptcy rumors. Beazer said the rumors were unfounded.
Stocks rallied on Thursday as investors were encouraged by a number of earnings reports but remained cautious due to subprime mortgage jitters.
The sudden spike in stocks, especially in the Dow Jones Industrial Average, was reminiscent of Wednesday's late rally, when the Dow quickly exited negative territory to close sharply higher.
"We're trying to form a short-term bottom, we have to wash out some worries about subprime, hedge funds and M&A deals that may not go through," said Tom Schrader, managing director of U.S. listed trading at Stifel Nicolaus. "But we had a good intermediate correction and it looks like we are setting up a base for a rally."
"It's well beyond subprime ... this is going to migrate for awhile," said Robert Albertson, chief strategist at Sandler O'Neill. "I would not be in financials at this point with the exception of the large U.S. banks."