Updated from 4:19 p.m. EDTStocks in New York ended the week with losses Friday as the major averages took a breather after three weeks that had sent the Dow Jones Industrial Average up 21% from its low earlier this month. For the day, the Dow dropped 148.38 points, or 1.9%, to 7776.18, and the S&P 500 lost 16.92 points, or 2%, to 815.94. The Nasdaq Composite fell 41.80 points, or 2.6%, to 1545.20.
Citi and JPMorgan had the greatest losses of the Dow components on Friday, sliding 6.8% and 5.8%, respectively. "There's a good amount of profit-taking, which is not surprising considering the increase we had this week," says Anu Sharma, managing director of the Market Intelligence Desk at Nasdaq. Despite the day's losses, the market had its third consecutive week of gains. The Nasdaq, which is up a little more than 21% from its March 9 low, briefly turned positive for the year Thursday.
But, says Sharma, "You're starting to see a little bit of caution, that we had too much too fast." Many on Wall Street believe that the recent run-up in the major indices is a bear market rally, and not the start of a bull market, at least until stocks successfully retest their most recent lows without breaking through them. "We're not out of the woods yet," says Paul Nolte, director of investments at Hinsdale Associates. "We've had a period of five months or so where the market has violently gone nowhere, and I think that will continue for a while. "The key is not necessarily the rally, but how the inevitable decline that follows shapes up," he says. "If it's more orderly and doesn't break old lows and we see base-building here, then there might be more reason for excitement. People have to remember that the bottom is a process and not a point in time." Once the new quarter begins, fund managers will be positioning themselves, and if they're confident they'll increase their stakes in equities, says Sharma. "A lot of these buy-side firms have been decreasing exposure consistently, and if we can see a reverse or an uptick, it's a good indication that things could be turning around."
Some of the economic data, particularly home sales and durable goods, have been better than expected this week, perking up the market as traders also prepare for the end of the quarter. But signals are mixed, at best. KB Home ( KBH) said with its quarterly report, for instance, that "we currently foresee no meaningful improvement in market conditions for the remainder of this year." The final trading day of the week also offered a mixed view of American income and spending. The Commerce Department said that spending was up 0.2%, after rising by 1% in January. Income, however, fell 0.2%, reversing a 0.2% gain from a month prior. London's Barclays ( BCS) rose 21.4% to $9.89 after reports that the bank had passed the final stages of an "extreme stress test" implemented by regulators and will not need additional taxpayer help. The Financial Services Authority will wrap up its examination of the bank in the next few days and has indicated that Barclays doesn't need any fresh capital, The Financial Times reports. In domestic business, General Motors ( GM) added 6.2% to $3.62 after The Wall Street Journal reported that the U.S. government is willing to extend the deadline for the struggling automaker to gain concessions from its main union and bondholders by 30 days. That's a good thing for GM, because reports also say that the company is unlike to meet the deadline. There were a few notable analyst actions in the oil and gas space, including a Goldman Sachs upgrade of ConocoPhillips ( COP) to buy from neutral.
Meanwhile, Deutsche Bank downgraded Petrobras ( PBR) to hold from buy with a $35 price target in light of the lower natural gas prices in North America and other valuation factors. ConocoPhillips added 2 cents a share to $40.33, Petrobras fell 1.3% to $6.91. Barclays also cut contract driller Rowan ( RDC) to equal-weight from overweight and lowered its price target. Shares were down 7.4% to $13.20. Oil fell $1.96 to settle at $52.38 a barrel, while gold shed $10 to $923.20. As for Treasuries, the 10-year note was falling 5/32 to yield 2.8%, and the 30-year was up 22/32, yielding 3.6%. The dollar was weaker against the yen and stronger vs. the pound and euro. As for markets overseas, stocks in Europe were largely lower, with London's FTSE 100 and the Frankfurt Dax losing 0.7% and 1.3%, respectively. In Asia, Hong Kong's Hang Seng was slightly higher, while Tokyo's Nikkei closed down 0.1%.