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Spokane, Washington  Est. May 19, 1883

Stocks drop as optimism dissipates

Associated Press The Spokesman-Review

Stocks dropped in light summer trading Friday after Apple Computer Inc. said its mishandling of employee stock options will require it to make significant changes in its third-quarter results compared to last year’s earnings. The major indexes ended the week with losses.

Investors also had broader worries, especially fears of an economic slowdown. A steep increase in retail sales did little to allay those worries.

“We’re in a seasonally slow part of the year and there are a lot of unknowns on the horizon right now,” said Mike Malone, trading analyst, Cowen & Co. “Based on that, there really is no urgency to get overly aggressive.”

Every sector fell despite cheery retail sales numbers reported by the Commerce Department. Retail sales rebounded in July by 1.4 percent, the biggest gain in six months. June’s revised sales numbers were down 0.4 percent, much weaker than the 0.1 percent dip originally reported.

The Dow Jones industrial average fell 36.34, or 0.33 percent, to 11,088.03.

Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 5.07, or 0.40, to 1,266.74, and the Nasdaq composite index fell 14.03, or 0.68 percent, to 2,057.71.

The S&P 500 has been trading in a narrow range between 1,225 and 1,280 since mid-May. The bottom of the range is supported by stock valuations, but the top is held by concerns about economic growth, Malone said.

The Russell 2000 index of smaller companies was down 7.23, or 1.05 percent, at 679.04.

Any optimism investors feel is fragile. Investors had been waiting for the Federal Reserve to pause its streak of interest rate hikes and when it did, on Tuesday, stocks fell anyway.

“There’s a sense that the market’s never happy,” said Ryan Larson, a senior equity trader at Voyageur Asset Management Inc. in Chicago. “They want one thing and when they get it, the next day we’re on to something else.”

For the week, the Dow lost 152.32, or 1.36 percent. The S&P lost 12.62, or 0.99 percent and the Nasdaq dropped 27.34, or 1.31 percent.

Bonds fell, with the yield on the 10-year Treasury note at 4.97 percent, up from 4.93 percent Thursday. The U.S. dollar was mixed against other major currencies; gold prices were also mixed.

Crude oil futures rose. A barrel of light crude settled at $74.35, up 35 cents, in trading on the New York Mercantile Exchange.

Investors in tech stocks are closely watching the backdating scandal, which has already resulted in five indictments and a series of restatement announcements. More than 80 companies are undertaking voluntary reviews of their options or are being probed by government regulators .

Decliners led advancers by more than 2 to 1 on the New York Stock Exchange, where volume was 1.33 billion shares, down from 1.60 billion at the same time Thursday.

Overseas, Japan’s Nikkei stock average fell 0.42 percent. Britain’s FTSE 100 was down 0.06 percent, Germany’s DAX index was down 0.05 percent, and France’s CAC-40 was up 0.18 percent.