Volatile week wraps up with sizable decline
NEW YORK – Wall Street ended a tumultuous week with a sharp decline Friday, backtracking following two days of stunning gains as investors turned cautious and cashed in some of their winnings. The Dow Jones industrial average still managed to record its first weekly advance of 2008, even as it fell more than 170 points on the day.
The week, which started with a 465-point drop in the Dow soon after the market opened Tuesday, showed that the stock market is still fractious but may be going through a healthy process of trying to establish a bottom following weeks of sharp declines.
Investors had an initial burst of enthusiasm Friday, sending each of the major indexes up more than 1 percent, after upbeat profit reports from big names like Microsoft Corp. and word of a possible buyout of a troubled bond insurer. But the advance proved short-lived and the eventual decline wasn’t surprising given that investors putting down bets ahead of the weekend were coming off two days of big gains – including 400 points in the Dow.
“People may be looking to take some profits off the table in this volatile market. And there’s a lot of activity that’s coming up next week,” Scott Fullman, director of investment strategy for I. A. Englander & Co., said during the day’s back-and-forth trading.
President Bush is scheduled to deliver his State of the Union address Monday. Meanwhile, the Federal Reserve is expected to hold its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department will weigh in on the state of the job market on Friday.
Despite the pullback, Wall Street’s tone Friday stood in sharp contrast to the intensely dour mood that hung over the market when the week began. While U.S. markets were closed Monday for Martin Luther King Jr. Day, stocks in Asia and Europe plunged amid fears of a precipitous slowdown in the U.S. economy. To stave off a similar sell-off in the U.S. over recession fears, the Fed stepped in before the opening bell Tuesday with an emergency interest rate cut.
The central bank’s move to lower rates by a big 0.75 percentage point to 3.5 percent helped shore up investors’ confidence and led stocks to end the day well off their lows, although they still closed down. A day later, on Wednesday, Wall Street had an astonishing about-face, with the Dow swinging more than 630 points and turning a sharp sell-off into huge gains. Stocks then extended their advance Thursday.
The Fed is widely expected to cut rates again at next week’s meeting; many analysts expect a half-point cut.
The Dow fell 171.44, or 1.38 percent, to 12,207.17. The Dow had been up more than 100 points in the early going.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 21.46, or 1.59 percent, to 1,330.61. The technology-heavy Nasdaq composite index fell 34.72, or 1.47 percent, to 2,326.20.
Despite the huge moves seen during the week, stocks finished not far beyond where they began, with the Dow adding 108 points, or 0.89 percent. The S&P 500 ended the week up 0.41 percent and the Nasdaq lost 0.59 percent.
Overseas, Britain’s FTSE 100 closed down 0.12 percent, Germany’s DAX index finished off 0.06 percent, and France’s CAC-40 fell 0.76 percent. Japan’s Nikkei stock average jumped 4.10 percent after falling sharply earlier in the week. Hong Kong’s Hang Seng index likewise surged 6.73 percent by the close.