Third plus week despite pullback
NEW YORK – Caution reasserted itself Friday on Wall Street, sending stocks down sharply but not enough to stop the market from notching its third straight weekly advance.
Major indexes fell about 2 percent Friday, but most analysts agreed the pullback was a natural response to the market’s powerful climb this month. Financial and technology stocks led the retreat, and energy shares fell along with the price of oil.
The Dow Jones industrial average closed the week up 497.80, or 6.8 percent, at 7,776.18. The Standard & Poor’s 500 index rose 47.40, or 6.2 percent, to 815.94. The Nasdaq composite index rose 87.93, or 6 percent, closing at 1,545.20.
The Russell 2000 index, which tracks the performance of small company stocks, rose 29.89, or 7.2 percent, to 429.00.
The Dow Jones Wilshire 5000 Composite Index – a free-float weighted index that measures 5,000 U.S. based companies – ended at 8,286.84, up 485.49, or 6.2 percent, for the week. A year ago, the index was at 13,363.84.
A dip in personal incomes and a slowdown in personal spending gave investors reason to cash in some of their winnings after the Dow surged 21 percent over just 13 days. Analysts said the sentiment in the market was still more upbeat than it was a month ago, but the data were a reminder that the economy and the banking system remain troubled.
“There is still a definite caution in the air,” said Doreen Mogavero, president of Mogavero, Lee & Co., a New York floor brokerage, adding that she’s noted some hesitance among her clients. “I don’t think people are completely invested yet.”
Mogavero noted that the money that has gone into the market over the last few weeks has been “short-term” in nature, which leads her to believe that most people are not convinced that the economy will soon recover.
The market has been ratcheting up and down over the past week. Analysts weren’t surprised by its retrenchments, including Friday’s, because no one expects such a weak market to move consistently higher. And many analysts believe back-and-forth trading is actually a healthy way for stocks to recover, because it reflects a conservative rather than euphoric attitude among investors.
“I wouldn’t read too much into a down Friday,” said Sam Stovall, chief investment strategist, U.S. equity research at Standard & Poor’s. “It’s simply investors taking profits.”
Still, it was too early to tell whether the big March advance might go the way of Wall Street’s year-end rally, which was more than wiped out in January and February. Although the gains of the past three weeks have been based on early signs of improvement in the banking system and the economy, those advances are vulnerable to critical economic data due next week and first-quarter earnings reports that will begin in a few weeks.