Stocks fell on Friday, pushing the Dow
to the brink of a bear market, hounded by concerns that record
oil prices and the seemingly endless credit crisis will further
damage the economy.
Friday's decline built on Thursday's rout in which the Dow
fell about 360 points, and rounded out its worst week since
February 10.
While the blue-chip Dow average briefly dipped into bear
market territory, it managed to close above that level, thus
narrowly avoiding the official onset of a bear market, or a 20
percent drop from its all-time high.
As the price of oil crossed $142 for the first time, shares
of companies that sell everything from fast food to soap slid
as fears mounted that consumers will need to cut back. Procter
& Gamble (PG.N) shares lost almost 3 percent.
Financial stocks were the top drag on the S&P 500. Merrill
Lynch's (MER.N) shares fell after Lehman Brothers forecast
Merrill would write down another $5.4 billion in the second
quarter. In addition, Moody's Investors Service said it may cut
Morgan Stanley's (MS.N) credit ratings.
"We are already in a bear market. You see fundamentally
sound companies being punished for the overall performance of
indexes," said Peter Kenny, managing director at Knight Equity
Markets in Jersey City, New Jersey. "Even the good ships get
stranded on the beach when the tide goes out,"
The Dow Jones industrial average (.DJI) dropped 106.91
points, or 0.93 percent, to end at 11,346.51. During the
session, the Dow dropped below 11,331.62, or more than 20
percent below its October 9 closing high.
The Standard & Poor's 500 Index (.SPX) fell 4.77 points, or
0.37 percent, to close at 1,278.38, while the Nasdaq Composite
Index (.IXIC) slipped 5.74 points, or 0.25 percent, to
2,315.63.
For the week, the Dow fell 4.2 percent, the S&P 500 fell 3
percent for its worst weekly decline since June 6, and the
Nasdaq fell 3.8 percent, its biggest weekly drop since February
10.
Merck & Co (MRK.N) shares, which rose after a positive
study on its experimental migraine treatment, as well as a gain
in oil companies' shares helped keep the losses in check.
Merck's stock rose 2.2 percent to $36.98 after it said a
late-stage study showed its treatment provided similar pain
relief to AstraZeneca PLC's (AZN.L) Zomig treatment, but was
better tolerated.
U.S. crude climbed to a record for a second straight day,
jumping as high as $142.99 a barrel, as a weak dollar and
slumping equities made oil and other commodities an attractive
investment alternative. Exxon Mobil shares gave the biggest
boost to the S&P 500, even though they rose a mere 0.2 percent
to $86.55.
Companies whose fortunes are closely tied to the cost of
fuel also fell. U.S. plane maker Boeing's (BA.N) shares fell
1.9 percent to $66.92. United Technologies (UTX.N) shares
dropped 2.6 percent to $61.15 and weighed heavily on the Dow.
Among financials, Merrill shares fell 1.1 percent to
$32.70, while Morgan Stanley shares dipped 0.3 percent to
$36.71.
JPMorgan Chase (JPM.N) shares fell 3.5 percent to $35.05
and were among the top drags on the S&P 500, while Citigroup
(C.N) shed 2.4 percent to $17.25. Citigroup's decline also
weighed on the S&P.
American International Group Inc (AIG.N) shares fell 1.2
percent to $27.75. AIG said it planned to absorb up to $5
billion in losses on sales of investments from a dozen
insurance units hit by the subprime meltdown, Bloomberg News
reported.
BlackBerry maker Research In Motion Ltd (RIMM.O)()
fell 2 percent to $120.98, adding to the previous day's steep
losses sparked by the disappointing profit outlook the company
gave late Wednesday. RIM was the top drag on the Nasdaq.
Home builders' shares tumbled after KB Home (KBH.N), the
No. 5 U.S. home builder, posted a wider-than-expected quarterly
loss. The stock fell 2.3 percent to $17.72 onthe NYSE.
Early in the session, Commerce Department data showed U.S.
personal spending rose by a greater-than-expected 0.8 percent
in May, while a key gauge of inflation remained muted.
Some economists said the stronger spending would double
the pace of U.S. growth in the second quarter from what
they had been predicting before the data. However, there is a
big question mark over whether this will be sustainable.
These concerns were reinforced a short while later by the
Reuters/University of Michigan Surveys of Consumers, which hit
another 28-year low in June of 56.4 from May's 59.8 reading. It
also showed elevated household expectations for inflation.
Trading was active on the New York Stock Exchange, with
about 2.29 billion shares changing hands, above last year's
estimated daily average of roughly 1.90 billion, while on
Nasdaq, about 3.36 billion shares traded, also above last
year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by a ratio of
about 2 to 1 on the NYSE and by 3 to 2 on Nasdaq.
(Editing by Jan Paschal)
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