By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell on Friday as the
10-year Treasury yield rose to 2.5% and Oracle Corp.'s dive weighed
on two of the benchmark stock indexes.
The Nasdaq Composite (RIXF) lost 28 points, or 0.8%, to 3,336,
as the tech-heavy index was hurt by an 8% drop in shares of Oracle
Corp. (ORCL). The tech bellwether delivered a disappointing
quarterly earnings report late Thursday.
The S&P 500 index (SPX) slipped 6 points, or 0.4%, at 1,582,
with Oracle its top decliner.
Information technology and materials led losses among its 10
major industry groups, while consumer staples posted the biggest
gains.
The Dow Jones Industrial Average (DJI) fell 25 points, or 0.2%
points, to 14,733. Merck & Co. (MRK) and Procter & Gamble
Co. (PG) were its top gainers.
The main indexes all opened with solid gains Friday, recovering
from a two-day slump prompted by worries that the Federal Reserve
may start winding down bond buying later this year. But stocks now
have given up their gains.
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, both in terms of points and
percentage. It's on track for a third straight day.
Morning rallies in the middle of a decline can't sustain
themselves, said Bruce Bittles, chief investment strategist at
Robert W. Baird & Co. Investors use such rallies to exit
positions while they can, he said.
"It's about what you'd expect," Bittles told MarketWatch,
referring to Friday's reversal.
The rise in the 10-year Treasury yield (10_YEAR) is also
providing a headwind, according to Bittles. He said 2.5% is a key
level.
"If it breaks through there, I think the market will really have
some problems," he said. The yield has briefly topped that level
Friday, but was last back below that mark.
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."
Friday is 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.
Investors also are absorbing remarks from St. Louis Federal
Reserve President James Bullard, who explained on Friday why he
voted against the latest Fed policy decision. Bullard said the
decision by the Federal Reserve 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.
Facebook Inc. shares (FB) rose 1%. UBS analysts on Friday
upgraded the social-network company to a buy rating, citing new
monetization efforts and higher advertising revenue.
On Thursday, the Dow dived 354 points, or 2.34%, 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, 2011. Gold and oil prices also tumbled, while the dollar and the
10-year Treasury yield jumped.
On Friday, most Asian stocks continued to fall, though Japanese
stocks advanced. European stocks finished lower.
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