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Stocks End Lower Amid Recovery Worries

Stocks fell for a third straight session Friday as disappointing reports on new-home sales and durable-goods orders offset an uptick in consumer sentiment.

The Dow Jones Industrial Average dropped 42.25, or 0.4 percent, to close at 9,665.19, while the S&P 500 lost 0.6 percent. The Nasdaq was the hardest hit of the three, down 0.8 percent, after a disappointing earnings report from BlackBerry maker Research In Motion.

Volume was moderate today, with roughly 1.2 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers about 6 to 5.

For the week, the Dow shed 1.6 percent, snapping a two-week winning streak. The S&P tumbled 2.2 percent for the week, while the Nasdaq dropped 2 percent.

New home sales rose 0.7 percent in August. It was the fifth straight increase but came as a slight disappointment — economists had expected a 1.6-percent increase — and July was revised lower. This came a day after a disappointing reading on sales of existing homes.

Orders for long-lasting durable goods such as cars and refrigerators unexpectedly fell 2.4 percent.

The University of Michigan reported its gauge of consumer sentiment rose to 73.5 at the end of September, the highest since January 2008, from 65.7 in August.

Sectors sensitive the recovery were among the day's biggest decliners, including technology, manufacturing and financial stocks.

McDonald's and Coca-Cola, stocks that typically do well in a weak economy, were the Dow's biggest advancers.

Shares of Research In Motion tumbled 17 percent after the BlackBerry maker beat its earnings targetbut missed the mark on sales and delivered a disappointing outlook. The stock had risen nearly 20 percent since July amid hopes that the recovery would spur business and consumer spending on technology.

Meanwhile, Hewlett-Packard ticked higher after the computer maker said it expects to hit earnings and revenue targetsanalysts expect in the next fiscal year.

Ford Motor slipped despite some upbeat remarks that it expects to return to profitability in 2011 and will build a new $490 million plant in China to capitalize on expanded opportunities there.

KBHome tumbled 8.5 percent after the homebuilder reported its loss narrowed but CEO Jeff Mezger said he doesn't see "meaningful improvement" in the housing market in the near future.

Goldman Sachs shares ended down nearly 2 percent despite comments from a Citigroup analyst that the brokerage could get a boost from new over-the-counter derivative- and commodity-trading rules.

Allos Therapeutic shares ended down 3.5 percent despite the fact that the small-cap drugmaker received FDA approval for its lymphoma treatment Folotyn.

Shares of car-battery maker A123 slipped 3.4 percent, after soaring more than 50 percent on their debut Thursday.

Earlier in the week, the Dow was barreling toward 10,000, coming within 100 points of that goal before pulling back. All three major indexes hit new highs for the year midweek, before steadily declining.

Still, all three major indexes remain up for the month September, bucking the historical trend that September is the worst month of the year for stocks.

The driving forces in the market this week were the dollar and the Fed. The dollar hit its lowest point in over a year, which helped create some of the market’s peaks, and investors were initially encouraged by the Fed’s upbeat language on the economy.

But the Fed rattled some cages when it announced plans to scale back some of its emergency-lending programs, leaving investors to wonder how the economy will fare without being propped up by the government. And, they’re worried that the Fed may start raising rates soon.

Market pros said we will see the Dow hit 10,000 — but it won’t be as soon as some expect — probably sometime in early October.

Next week, investors will be looking to a meeting of world finance chiefs for insight on rates and the September jobs report.

On Tap for Next Week:

TUESDAY: Case-Shiller home-price index; consumer confidence; Fed's Plosser speaks; Earnings from Walgreens
WEDNESDAY: Weekly mortgage applications; ADP jobs report; GDP; weekly crude inventories; Fed's Lockhart speaks
THURSDAY: Personal income/spending; jobless claims; ISM manufacturing index; pending-home sales; construction spending; auto sales; Fed's Bernanke, Pianalto, Lockhart speak
FRIDAY: Sept jobs report; factory orders; Calif. IOUs mature

Send comments to cindy.perman@nbcuni.com.