The stock market ended a losing week with light selling as investors grew uneasy about a rising dollar and spiking demand for the safest government debt. After two strong weeks, investors tried unsuccessfully to extend the market's rally after major stock indexes closed at 13-month highs on Tuesday. Disappointing reports on housing and worries about flagging demand at technology companies sapped strength from the market's eight-month rally.Stocks fell for the third straight day Friday as a disappointing earnings report from computer maker Dell (DELL) weighed on technology shares. The Nasdaq composite index, with a big representation of tech stocks, logged the weakest performance of the major indexes for the week.
Demand for safe havens rose Thursday and again Friday following Dell's report and as European Central Bank President Jean-Claude Trichet said the ECB plans to start reining in some of its stimulus programs.
Investors seeking safety pushed into the dollar and other investments seen as being stable such as short-term Treasurys. The yield on the three-month T-bill, which moves opposite its price, was flat at 0.02% from late Thursday. It stands near its lowest level of the year, which it hit Thursday. Yields briefly turned negative Thursday as investors seeking to pad their portfolios with safe investments before the end of the year were willing to accept losses.
"Investors seem to need a constant reassurance with where we are in the economic recovery," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego. "We just haven't gotten it in the past few days."
In the final hour of trading, the Dow Jones industrial average slipped 2.04, or less than 0.1%, to 10,330.40. The Dow fell 105 points, or 1%, in the past two days.
The broader Standard & Poor's 500 index fell 2.47, or 0.2%, to 1,092.43, while the Nasdaq fell 11.92, or 0.6%, to 2,147.88.
The ICE Futures US dollar index, which measures the dollar against other major currencies, rose 0.5%. The stronger dollar can hurt commodities prices and also sales of U.S. exporters, whose goods become more expensive overseas when the dollar rises.
Demand for longer-term Treasurys fell, pushing yields higher. The yield on the benchmark 10-year note rose to 3.36% from 3.34 percent.
D'Arcy said the week's economic numbers made investors more cautious.
Reports Wednesday and Thursday showing a drop in housing starts and a jump in mortgage delinquencies upended an advance that had been all but unbroken in November. Those figures brought worries that an economic recovery will be slow and bumpy.
Concerns about the pace of a recovery have dogged the market's eight-month rally but with the nation's unemployment rate now above 10% for the first time in 26 years and new worries about housing, some analysts say investors have raced too far ahead of a recovery in the economy.
Many investors have amassed big gains in the climb since March that has left the benchmark S&P 500 index up more than 20% so far this year. Analysts say trading volume has fallen in November because some money managers are stepping away from the market to safeguard their gains.
Traders predict volume will be light again next week because of Thanksgiving. Even with the holiday, the week brings a flurry of reports on home sales, unemployment, consumer confidence and demand for big-ticket manufactured goods.
The government also will revise its early estimate that said the economy grew at an annual pace of 3.5% during the July-September quarter. Many analysts now expect GDP will be revised lower because of recent reports on housing and retail sales.
Hank Smith, chief investment officer of equity at Haverford Investments in Radnor, Pa., said investors are worried that a lower reading on GDP will mean the economy didn't start the final quarter of 2009 with as much strength as had been hoped.
Smith also said the market's slump in the final three days of the week isn't unexpected because of the steep gains of the first half of the month. He predicts this and other pullbacks won't be deep because investors who missed the market's eight-month rally are looking for opportunities to jump in.
"The investors who have missed this move are experiencing tremendous anxiety about missing a new bull market but also about getting paid nothing or, in some cases, negative returns," Smith said.
Even if stocks can manage to climb in the final six weeks of the year, some traders are worried that there will be little to propel the market higher in 2010 if worries about jobs, housing and consumers don't ease.
Investors got the type of downcast news from Dell that suggests a recovery could be uneven. The company said sales of its computers to big businesses remain sluggish. Its quarterly revenue and profit missed analysts' expectations. The stock fell $1.44, or 9.1%, to $14.43.
Energy companies logged some of the biggest drops as crude oil fell 74 cents to settle at $76.72 per barrel on the New York Mercantile Exchange as the dollar rose. Gold rose.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 876.8 million shares compared with 785 million shares traded at the same point Thursday.
The Russell 2000 index of smaller companies fell 3.28, or 0.6%, to 582.40.
Overseas, Britain's FTSE 100 fell 0.3%, Germany's DAX index lost 0.7%, and France's CAC-40 dropped 0.8%. Japan's Nikkei stock average fell 0.5%.
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