Losses continue as patience wanes
NEW YORK – On Wall Street, not so bad is no longer good enough.
Stocks extended the week’s losses Friday, further chilling the market’s spring rally. Traders who last week sent stocks higher on economic news that wasn’t as bad as expected are now selling. And analysts say it will take more upbeat data to restart the rally that swept major stock indicators up more than 30 percent from 12-year lows in early March.
The Labor Department said Friday that consumer prices in April were flat, as economists predicted. Manufacturing activity in the New York area and industrial production contracted less than economists expected. And a Reuters/University of Michigan index of consumer sentiment rose to an eight-month high in May, a possible harbinger of improved consumer spending.
But even with this handful of silver-lining economic data, traders found little incentive to buy. Instead, a drop in the price of oil hit energy companies, while financial stocks slid on worries that the economic recovery could be further off than traders had been betting in recent months.
“This market is tired,” said Joe Saluzzi, co-head of equity trading at Themis Trading LLC.
Wall Street’s rally has also hit a lull now that the government’s stress tests of banks are done, earnings reports are winding down and the first wave of April economic data has been released. Traders aren’t clear what the next catalyst might be to pump the market higher – or whether the gains might erode.
“We’ve gotten through the panic point, and what will get us to the next level is seeing the economy actually grow. It’ll happen, but it’s a matter of when,” said Douglas Kreps, managing director at Fort Pitt Capital Group.
The Dow Jones industrial average closed the week down 306.01, or 3.6 percent, at 8,268.64. The Standard & Poor’s 500 index fell 46.35, or 5 percent, to 882.88. The Nasdaq composite index fell 58.86, or 3.4 percent, to 1,680.14.
The Russell 2000 index, which tracks the performance of small company stocks, fell 35.98, or 7 percent, for the week to 475.84.
With the S&P 500 index up 30.5 percent from the lows of two months ago, many traders are finding it a safer bet to cash in some of their gains. About two stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.3 billion shares, compared with 6.8 billion shares traded Thursday.
Not all the news of the day fit with the idea that the economy is sewing up its holes.
The Treasury Department agreed to extend billions in federal bailout funds to six major life insurers. The move was positive because it means the insurers will get more capital, but negative because it implied that the insurers’ problems posed a serious risk to the financial system.