By Corrie Driebusch
U.S. stocks fell Friday as worries about Greece and its
likelihood of securing a deal with its international creditors and
data that showed continued weakness in the U.S. economy weighed on
investors.
Friday closed out a sedate month of trading, with stocks inching
higher and touching records on muted trading volumes.
Despite Friday's declines, stocks finished May with gains. The
Dow industrials and the S&P 500 both gained 1% during the
month.
In May investors pored over a raft of economic indicators. Some,
such as an apparent resurgence in home building, seemed to suggest
the U.S. economy is improving, while others cast some doubt on an
economic bounceback. Investors are watching for signals as to
whether the Federal Reserve may delay raising interest rates, which
some worry may hurt stock performance.
"The market is in a wait-and-see mode...was the weakness in the
first quarter temporary or was it something more permanent," said
Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle
Investments, which manages roughly $500 billion.
Investors appear to still be waiting to see a catalyst to shift
their portfolios. May was marked not only by slow trading but also
by extremely low volatility. In May only about 6.05 billion shares
were changing hands a day, making it the slowest month in trading
since November, when about 6.04 billion shares were traded each
day. The market's "fear gauge," the CBOE Volatility Index,
languished near low levels seen before the financial crisis.
On Friday, the Dow Jones Industrial Average declined 115.44
points, or 0.6%, to 18010.68, after earlier in the session the
index fell by as much as 158 points. The S&P 500 lost 13.40
points, or 0.6%, to 2107.39, and the Nasdaq Composite shed 27.95
points, or 0.5%, to 5070.03. Trading volumes surged toward the end
of the session, which is common on the last day of the month as
investors rebalance stock positions.
New data Friday confirmed that the U.S. economy hit a slow patch
in the first quarter, and called into question the prevailing
narrative that the slowdown was just a blip.
"The signs are encouraging, but it's not enough yet to change
the direction of the market in a significant fashion," Ms. Bahuguna
said.
On Friday, the Commerce Department said in its second reading of
U.S. economic output for first-quarter gross domestic product
shrank at a 0.7% rate. The initial reading of first-quarter GDP
showed the U.S. economy slowed sharply, growing at just 0.2%.
Economists surveyed by The Wall Street Journal had expected that
to be revised downward to a 1% contraction in Friday's reading.
Also weighing on stocks Friday morning was a decline in the
Chicago Business Barometer, commonly known as the Chicago PMI, a
survey of Chicago-area purchasing managers that provides insight
into companies' business plans. The decline, which put the index at
less than 50, indicates that factory activity is contracting.
Separately Friday, a reading on consumer sentiment showed U.S.
consumer optimism in May was higher than expected but still down
sharply from the end-of-April reading.
U.S. stocks were also hurt by news out of Europe.
International Monetary Fund Managing Director Christine Lagarde
said in a German newspaper interview that a Greek exit from the
euro is a possibility, contradicting comments from European Central
Bank officials. The Greek government, meanwhile, said Thursday that
it aims to have a deal in place to secure financing by Sunday.
While Greece isn't new for investors, it continues to act as an
overhang in the markets.
Jim Dunigan, chief investment officer at PNC Wealth Management,
said he believes the country will come to an agreement with its
creditors, but he says that "Greece's problems are not going to go
away overnight."
Germany's DAX fell 2.3%, and France's CAC 40 dropped 2.5%.
In other markets, gold futures rose 0.1% to $1189.40 an ounce.
The yield on the 10-year Treasury note fell to 2.097% from 2.132%
on Thursday. Yields fall as prices rise.
Crude-oil prices rose 4.5% to $60.30 a barrel.
In corporate news, Humana Inc. shares jumped 20% after The Wall
Street Journal reported that the health insurer is considering
selling the company and that it has received indications of
takeover interest.
GameStop Corp. shares rose 6.1% after the company reported a
higher first-quarter profit late Thursday as a result of new video
and digital game downloads.
Shares of chip maker Altera Corp. rose 4% after a report that it
is nearing a deal with rival Intel Corp., whose shares rose
1.3%.
Stephanie Yang contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com