Is the party over? Or, are we just taking a little breather before the next keg arrives?
Stocks skidded Friday after a disappointing report on consumer prices and as consumers' mood took a turn for the worse. Plus, some market pros said traders still weren't over the disappointing retail-sales report that came out Thursday.
The Dow Jones Industrial Average shed 76.79, or 0.8 percent, to close at 9,321.40. The S&P 500 fell 0.9 percent, and the Nasdaq dropped 1.2 percent.
That snapped — with a resounding *CRACK!* — the market's four-week winning streak: The Dow finished down about 50 points for the week. The Nasdaq was down about 15 points, while the S&P lost just 10, holding its head above the 1,000 mark.
The stock market has gotten ahead of reality, Pimco's Mohamed El-Erian told CNBC Friday.
"Stock investors are making overly optimistic assumptions," El-Erian said. "The key stimulus has already come into the consumer and has helped in the last few months. But for the third and fourth quarters looking ahead, I am not so sure things will be as good."
Today's economic data didn't help: Reuters and the University of Michigan said their gauge of consumer sentiment unexpectedly dropped to 63.2in a mid-August reading from a downwardly-revised 66 at the end of July as consumers were more optimistic about the economic recovery but not their personal financial situations.
Plus, consumer prices were flat in July from June, but tumbled 2.1 percentfrom July 2008, its largest decline since January 1950.
There was one bright spot on the economic front: Industrial production rose 0.5 percentin June, the first increase in nine months, offering fresh evidence that that the recession is winding down.
"Markets climb a wall of worry, and it looks like we still have a little more wall to climb," Jeff Kleintop, chief market strategist at LPL Financial, told Reuters.
It was an eventful week, marked by the Fed statement, in which policy makers said the economy "is leveling off," a distinct improvement from their last statement. Productivity improved, and industrial production started humming again but retail sales were a disappointment, jobless claims rose and consumers' mood took a turn for the worse.
Crude oil dropped nearly 5 percent this week, settling Friday at $67.51 a barrel.
Six of ten key S&P sectors finished lower this week, led by consumer discretionary, which lost 2.6 percent, and industrial companies, which fell 2 percent.
Health-care was the best performer, up 0.6 percent.
There were signs that the IPO market is heating up, with three offerings this week, including health information-technology firm Emdeon , which saw its shares rise 11 percent this week.
For the week, the best performers on the Dow were: Bank of America, Wal-Mart and Merck. The three worst were GE, Cisco and Boeing.
In Friday's action:
Boeing was the biggest decliner on the Dow, falling 3.8 percent, after yet another snag on the Dreamliner, this one an Italian snag: A supplierin Italy said it has stopped production on two sections of the 787 Dreamliner.
Alcoa was the second biggest decliner on the Dow, snapped a three-day rally with a 3.2-percent drop today.
Bank of America was the biggest gainer on the Dow, climbing 2.3 percent to close at $17.39. Citigroup started the day stronger, but ended down half a percent at $4.04.
Retail stocks were mostly lower, after some disappointing numbers out of the sector this week.
JC Penney shares skidded 6.2 percent after the department-store operator reported its loss shrunk, helped by cost-cutting measures, but signaled it could miss expectations later this year.
Shares of Nordstrom also fell more than 6 percent. The high-end department store hit its earnings target and raised its forecast for the yearbut same-store sales dropped 12.3 percent.
Abercrombie & Fitch rose nearly 4 percent as the teen retailer's results reflected the failure of its strategy to not lower prices amid the recession — same-store sales plunged 30 percent — but the chain said it's still on target for its international-expansion plans.
This came after the government reported Thursday that its measure of retail sales slipped 0.1 percent last month, defying economists' expectations that retail sales would rise, particularly given the impact of the "Cash for Clunkers" program.
Not a lotta LUV for Southwest Airlines shares — the stock dropped 1.7 percent after the company unexpectedly lost the bankruptcy-court auctionfor Frontier Airlines.
A bid from rival Republic Airways was selected over Southwest's, after Republic sweetened its offer, and Southwest ran into problems securing pilots union approval for the deal.
Volume was light, with 1.09 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, nearly 3 to 1.
All three major indexes are still up year-to-date: The Dow's up 6.2 percent, the Nasdaq, 26 percent, and the S&P, 11 percent.
As of today, 456 of the 500 S&P companies have reported earnings, with 72 percent beating expectations, 9 percent hitting their targets, and 19 percent missing. The biggest surprises came from EchoStar, Dr Pepper Snapple and Priceline.com.
On Tap for Next Week:
MONDAY: Earnings from Lowe's
TUESDAY: Housing starts; PPI; Earnings from Home Depot, Saks, Target, TJX, HP and Analog Devices
WEDNESDAY: Weekly mortgage applications; weekly crude inventories; Earnings from Deere, Limited
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed survey; Earnings from Gamestop, Hormel, and Sears
FRIDAY: Existing-home sales; Earnings from JM Smucker
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