U.S. stocks stretch to greater heights on Friday, but displayed declines for the week, which was dominated by fears that the Federal Reserve may start pulling back stimulus later this year.
After a very rough trading session, the S&P 500 index jumped 4.24 points, or 0.3%, to end at 1,592.43. It slumped 2.1% for the week.
Eight of the S&P 500’s 10 major sectors ended higher, with consumer staples leading gainers and information technology leading decliners.
The Dow Jones Industrial Average rose 41.08 points, or 0.3%, to 14,799.40, leaving it down 1.8% for the week. This was the Dow’s worst week since the one ended on April 19.
Hewlett-Packard Co. was the top backslider, while Procter & Gamble Co. was the top gainer in the Dow on Friday.
The Nasdaq Composite moved back 7.39 points, or 0.2%, to end at 3,357.25, leaving it with a weekly loss of 1.9%. The tech-heavy index was hurt by a 9.3% drop in shares of Oracle Corp.. The tech bellwether delivered a disappointing quarterly earnings report late Thursday.
More than 2 billion shares traded on the New York Stock Exchange. Composite volume topped 5.6 billion.
Friday was a quadruple-witching session, meaning expirations for index futures, options on index futures, single-stock futures and stock options. Such sessions can be the most heavily traded days of the year.
Friday’s gains came after The Wall Street Journal suggested that investors may be misreading the Federal Reserve’s message. Jon Hilsenrath, the Journal’s Fed watcher, wrote a blog saying that markets may be overlooking several dovish signals sent by Fed Chairman Ben Bernanke.
U.S. stocks, along with commodities and bonds, fell sharply in the previous two sessions after Bernanke said in a news conference Wednesday that the central bank may scale back its bond buying later this year. While the Fed may do so, Hilsenrath wrote, it will be a long time before the Fed raises short-term interest rates.
The Dow’s slide on Wednesday and Thursday — a drop of 560 points or 3.66% — was its worst two-day drop since the two sessions ended Nov. 1, 2011.
Investors also absorbed remarks from St. Louis Federal Reserve President James Bullard, who explained on Friday why he voted against the Fed decision. Bullard said the Fed’s decision to lay out its plans to taper bond buys was badly timed. The Fed should have waited “for more tangible signs” of economic improvement and a halt in the downward direction for inflation, according to Bullard.
The rise in the 10-year Treasury yield — which surged to 2.53% on Friday, its highest level since August 2011 — is providing a headwind for stocks, according to Bruce Bittles, chief investment strategist at Robert W. Baird & Co. He said 2.5% is a key level. “If it breaks through there, I think the market will really have some problems,” he said.
Meanwhile, Goldman Sachs analysts said Friday in a note that their top recommendation for 2013 is still to buy stocks and sell bonds.
“We continue to expect the index will close the year at 1,750, a rise of approximately 10% from today’s level,” the analysts wrote, referring to the S&P 500 index. “However, median historical drawdown episodes suggest at some point during the next six months that the S&P 500 may decline to the mid-1,500s before rebounding to our year-end target.”
Jonathan Krinsky, chief technical strategist at Miller Tabak, also sees potential support for the S&P 500 in the mid-1,500s. “We have just broken the psychological 1,600 level after two prior tests, which now creates short-term resistance in the 1,598 to 1,608 range,” Krinsky wrote in a note.
“There should be downside support in the 1,550-1,575 area, which marked major resistance over the last decade.”
Shares of Facebook Inc. rose 2.6% after UBS analysts upgraded the social-network company to a buy rating, citing new monetization efforts and higher advertising revenue.
In Asia on Friday, stocks in Shanghai and Hong Kong ended lower, but Japanese stocks advanced. European stocks dropped, with the Stoxx Europe 600 index falling 1.2% to 280.40, its lowest closing level of the year. For the week, the index declined 3.7%.
Gold for August delivery rose $5.80 on Friday to close at $1,292 an ounce on the New York Mercantile Exchange, but posted a weekly loss of $95.60 an ounce.
Crude oil for August delivery fell $1.45 to end at $93.69 a barrel on Nymex, leaving it with a weekly loss of $4.38 for the week.
On Thursday, the Dow dived 354 points, or 2.3%, representing its largest one-day percentage decline since Nov. 7, the day after the U.S. election, and its largest one-day points drop since Nov. 9, 2.4011. Gold and oil prices also tumbled, while the dollar and the 10-year Treasury yield jumped.
