Stocks end Friday with a modest losses, up for week
NEW YORK -- Stocks ended a tumultuous two-week run relatively quietly Friday, finishing another back-and-forth session down modestly as investors were cheered by signs of easing in the credit markets and absorbed lackluster economic news.
The expiration of options contracts helped tug the market in different directions throughout the session. Still, the Dow Jones industrial average traded within a narrower range than it had in much of the past two weeks. The Dow ended down 127 but big rallies on Monday and Thursday gave the blue chips an advance of 4.8% for the week — the best weekly gain since March 2003.
The market spent the first half of the session vacillating, moving between gains and losses after the government said Housing starts fell more than 6% last month to the lowest pace since early 1991. But investors' mood seemed to pick up later in the session as lending rates for bank-to-bank loans eased, indicating some bank fears about not being repaid by borrowers is easing. Demand for safe-haven investments like Treasury bills also decreased. The final hour of trading again proved pivotal as it has in much of October; stocks fluctuated as investors squared away positions for the week.
Given the magnitude of most of the recent sessions in October, the indexes' moderate declines Friday seemed barely noteworthy. And advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.74 billion shares.
The loosening of credit markets appeared to draw most of investors' attention. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.41% from 4.50% on Thursday, the fifth consecutive day of declines.
"I think we're beginning to get a slightly better feeling in the credit market," said Peter Cardillo, chief market economist at Avalon Partners, a New York brokerage house, pointing to the move in Libor. "I'm sure we'll still have a strong bear grip to the market but I do believe the market was way oversold. I do believe we've made a bottom."
It was an erratic week on Wall Street, with the Dow soaring 936 points on Monday, slipping moderately Tuesday, sinking 733 points Wednesday, and then rallying 401 Thursday. The volatility is not providing investors with much relief, but it is a welcome change from last week's relentless plunge, during which the Dow logged its worst week ever and Wall Street lost about $2.4 trillion in shareholder wealth.
According to preliminary calculations, the Dow Jones industrial average fell 127.04, or 1.41%, to 8,852.22, after falling 261 points in the early going and rising 302 points — a 563-point range.
Broader stock indicators showed more modest declines. The Standard & Poor's 500 index fell 5.88, or 0.62%, to 940.55, while the Nasdaq composite index fell 6.42, or 0.37%, to 1,711.29.
For the week, the S&P 500 unofficially rose 4.6%. It was the S&P's best week since February. The Nasdaq unofficially advanced 4.1% for the week — its best week since early August.
Investors appeared to look past a reading on October consumer sentiment, perhaps because it was expected after a stream of other negative data on consumers. A weaker-than-expected report on retail sales Wednesday made clear that consumers nervous about the economy and the faltering stock market are less willing to pull out their wallets. The Reuters/University of Michigan's index of consumer sentiment fell to 57.5 from 70.3 in September.
David Dietze, president at Point View Financial Services in Summit, N.J., contends that much of the market's whipsaw moves in the past month have come as hedge funds and mutual funds were forced to sell positions because some shareholders were cashing out.
"These hedge funds are getting hit by redemptions, their credit lines are being pulled and they are having to sell furiously," he said. "Selling begets selling, which begets selling, which begets more selling."
While Dietze sees risks for the economy, he questions whether the rapidity of the stock market's retreat signals the pullback was overdone.
"We have a credit crunch which is morphing into a general recession and certainly a lot of the economic data points down but still, to come in this week and see the markets down 20% — basically a bear market within a bear market just this month — you wonder if there isn't just this massive overreaction," he said.
The credit markets have been improving after moves by governments around the world, particularly plans to buy stakes in private banks to boost their lending. But there's still high demand for Treasury bills, regarded as the safest assets around, an indication that there is still much fear in the markets.
In earnings news, Schlumberger reported a rise in third-quarter profit that was in line with analyst expectations. The oil field services company said tougher times might lie ahead, though. The stock fell.
Manufacturing conglomerate Honeywell International's report was similarly cautious: a better-than-expected quarterly profit increase, but a tightened outlook for the year. Honeywell fell.
Late Thursday, Google posted a 26% increase in third-quarter profit. Google shares rose Thursday, the Internet company's stock had fallen to a three-year low.
Markets overseas were mostly higher Friday. In Asia, Hong Kong's Hang Seng index dropped 4.44% to its lowest level in almost three years, but Japan's Nikkei average rose 2.78% after a 11.4% loss Thursday. In Europe, Britain's FTSE index rose 4.43%, Germany's DAX index rose 3.43%, and France's CAC-40 rose 4.68%.
Contributing: Reuters