By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell on Friday, retracing
a mid-week rally on a surprise Federal Reserve decision, as
investors reacted to the uncertain science of reading verbal
signals from U.S. central bankers.
The Dow Jones Industrial Average and the S&P 500 both fell
for a second session, retreating from the record heights that came
Wednesday after the Federal Reserve unexpectedly said it would
refrain from curbing stimulus for now. On Monday, stocks rallied in
the wake of Larry Summers deciding to pull his name out of
contention to replace Ben Bernanke as chairman of the Federal
Reserve.
The final trading session of the week had one Federal Open
Market Committee member signaling the Fed could curb stimulus next
month and another critical of the decision not to taper in
September.
It has been a "big week if you're a Fed watcher, between Larry
Summers and the FOMC meeting, the market was caught off guard,"
said Richard Slinn, co-head of investments for Northern California,
J.P. Morgan Private Bank. The bank manages $910 billion in
assets.
The Fed's unexpected decision to hold off on reducing its $85
billio in monthly asset purchases was "aimed more at Main Street
than Wall Street," said Slinn, adding that the Fed wants to ensure
its "decisions don't risk the nascent recovery in the private
sector," given the potential impact of rising interest rates on
housing and the auto sectors.
The Dow Jones Industrial Average (DJI) fell 120 points, or 0.8%,
to 15,516. That sent it below its Tuesday closing level, giving up
all off the 147-point rally on Wednesday that followed the Fed
statement.
The market was still on track for its third week of gains.
Aluminum-producer Alcoa Inc. (AA) was among the top three
decliners among the Dow's 30 components, its shares down 1.8% on
its final day of trading as a blue chip.
Alcoa, Hewlett-Packard Co. (HPQ) and Bank of America Corp. (BAC)
will no longer be part of the Dow 30 when trading begins Monday,
replaced by Goldman Sachs Group Inc.(GS), Visa Inc. (V) and Nike
Inc. (NKE).
Another Dow component, Caterpillar Inc. (CAT), fell 2.6% after
the heavy-equipment maker in a regulatory filing reported a decline
in retail sales.
The S&P 500 index (SPX) dropped 9.38 points, or 0.5%, to
1,712.96, with telecommunications losing the most and health care
the best performing of its 10 major sectors. It's up 1.4% for the
week.
The Nasdaq Composite (RIXF) shed 7.44 points, or 0.2%, to
3,781.9.
Apple Inc. (AAPL) shares fell 0.4% as long lines formed at the
iPhone maker's retail stores around the globe, with the latest
models of its handsets on sale, starting Friday.
AK Steel Holding Corp. (AKS) declined 7.9% after warning of a
wider-than-expected third-quarter loss.
For every stock rising, nearly three declined on the New York
Stock Exchange, where 642 million shares traded as of 1:45 p.m.
Eastern.
Composite volume approached 2.2 billion.
Interviewed Friday on Bloomberg Television, Federal Reserve Bank
of St. Louis President James Bullard said the decision not to begin
tapering followed weaker economic data, and that a small taper
could start in October. Stock futures fell after he spoke. Read
about what some Fed watchers think.
In prepared comments for delivery at a business luncheon in New
York, Bullard said tapering is more likely if the labor market
continues to improve.
Kansas City Fed President Esther George on Friday said markets
were ready for reduced stimulus to begin, and the central bank's
failure to follow through on expectations hurt its credibility on
Wall Street.
Crude-oil futures(CLV3) lost 74 cents, or 0.7%, to $105.65 a
barrel and gold futures dropped $36.80, or 2.7%, to $1,332.50 an
ounce on the New York Mercantile Exchange.
The dollar (DXY) gained against the currencies of U.S. trading
partners, including the euro (EURUSD) but excluding the yen
(USDJPY)
Treasury prices held steady, with the yield on the benchmark
10-year note (10_YEAR) down 3 basis points at 2.725%.
A day after rallying to records on the FOMC decision not to
taper, U.S. stocks mostly fell Thursday in a consolidation of the
prior day's gains.
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