Stocks Saddled With Modest Losses

The major indices fall into negative territory after a weak, choppy morning. Investors weigh consumer sentiment data, more downgrades and earnings.
Author:
Publish date:

Updated from 11:18 a.m. EDT

U.S. stocks softened Friday, as traders contemplated the previous day's selloff, record-high oil prices and weakening consumer sentiment.

The

Dow Jones Industrial Average

was recently down 53 points at 11,401, and the

S&P 500

was off a point to 1272. The

Nasdaq

was losing 11 points at 2310.

The U.S. indices were rocked Thursday, in no small part because of a Goldman Sachs downgrade of the domestic investment banks and the firm's negative comments on

Citigroup

(C) - Get Report

and

General Motors

(GM) - Get Report

. Goldman's comments combined with weakness in

Research In Motion

(RIMM)

and

Oracle

(ORCL) - Get Report

worked to create conditions for a steep selloff.

The Dow plunged 358.41 points, or 3%, and ended at 11,453.42, its lowest level in more than a year. The S&P fell 38.82 points, or 2.9%, to 1283.15, and the Nasdaq slumped 79.89 points, or 3.3%, to 2321.37.

"The markets are puking because the

Federal Reserve

can't be called to help them out. The Federal Reserve is powerless. They have the kryptonite of soaring inflation and the credit crisis," said Richard Yamarone chief economist Argus Research.

Ahead of the new day, Lehman Brothers said

Merrill Lynch

(MER)

could be facing another $5 billion in writedowns because of its exposure to the bond insurers.

Meanwhile, insurance firm

AIG

(AIG) - Get Report

is bracing for as much as $5 billion in losses related to subprime mortgages,

Bloomberg

reported.

Among earnings, homebuilder

KB Home

(KBH) - Get Report

posted a widened second-quarter loss that was worse than Wall Street's expectations.

Following the prior close,

Bank of America

(BAC) - Get Report

announced it would

eliminate

7,500 jobs after merging with mortgage lender

Countrywide Financial

(CFC)

.

Brewer

Anheuser-Busch

(BUD) - Get Report

also announced it would trim as many as 1,290 jobs as a profit-boosting measure. Anheuser had on Thursday rejected an unsolicited bid of $46 billion from InBev.

In tech, telephone company

Ericsson

(ERIC) - Get Report

led the decline, falling 6% on an announcement that Sony Ericsson, its joint venture with

Sony

(SNE) - Get Report

, has seen decreased demand for its mobile phones.

Credit Suisse also downgraded

Nokia

(NOK) - Get Report

to neutral from outperform, predicting the company would have trouble keeping up in the smartphone space.

RIM shares continued Thursday's selloff, losing 4%, and

VMware

(VMW) - Get Report

was dropping 8%.

Management consulting and information technology services provider

Accenture

(ACN) - Get Report

was one of few tech stocks trading in the green. After Thursday's close, the company

announced earnings

that beat expectations.

Materials and energy stocks were on the rise.

Occidental Petroleum

(OXY) - Get Report

,

Tenaris

(TS) - Get Report

and

Barrick Gold

(ABX)

enjoyed modest gains.

Traders were also monitoring the latest surge in oil, whose run-up this year was given new fuel in the previous session by comments from OPEC's president that $170-a-barrel crude could be a reality this year.

Lately, oil was up $1.10 at $140.74 a barrel. It had previously reached a heretofore unseen price of $141.67. The

US Oil

(USO) - Get Report

ETF was adding 0.7% to $113.92. Gold was up $13 at $928.10.

In economic data, the University of Michigan's June consumer sentiment index dropped to 56.4 from 59.8 in May, reaching its lowest levels in 28 years. The Commerce Department's personal spending number climbed 0.8% from April to May, its biggest increase since November 2007. Personal income rose 1.9% for the month, beating analyst predictions of 0.7%.

"Things are not that good, that we can spend at that pace, but things are not that bad as indicated in the consumer confidence. That's a real exaggeration of what's going on out there," said Yamarone. He said that the spending can be explained by the government's stimulus package.

Treasury prices were rising. The 10-year note was up 8/32 in price to yield 4%, and the 30-year was up 19/32, yielding 4.57%. The dollar was gaining against the euro, but losing ground to the yen and the British pound.

European markets were mixed, while Asia's exchanges slid. London's FTSE was up 0.2%, and Frankfurt's DAX was down 0.6%. Japan's Nikkei and Hong Kong's Hang Seng were both weaker.