Wall Street pulled back moderately Friday as investors cashed in gains from the previous session's big rally, concerned that the market might have advanced too quickly. The major indexes still managed to end the week with a solid advance.
Analysts said investors were remaining confident about a strong economic rebound but were being cautious for now. Trading also was choppy due to quadruple-witching day, the quarterly expiration of index futures and options as well as individual stock futures and options.
"Investors more or less are taking a pause after a pretty nice runup," said Richard Nash, chief market strategist at Victory Capital Management. "With the lack of any real economic data today, folks might just be booking some profits into the weekend."
The Dow Jones Industrials closed down 14.31, or 0.2 percent, at 9.644.82, having gained 113 points in the previous session to their first close above 9,600 since June 18 last year.
The broader market also finished lower. The NASDAQ composite index fell 3.81, or 0.2 percent, to 1,905.74, after climbing to its highest close in 18 months on Thursday. The Standard & Poor's 500 index declined 3.27, or 0.3 percent, to 1,036.31, having finished at its highest level in 15 months Thursday.
For the week, the Dow rose 1.8 percent, the NASDAQ gained 2.7 percent, and the S&P advanced 1.7 percent. The Dow has gained in six of the last seven weeks; the NASDAQ and S&P have posted wins in five of the last six weeks.
Stocks have surged since mid-March as investors grow increasingly optimistic about the economic outlook. Some analysts say the recent data bodes well for the upcoming third-quarter season.
"The economic data just continues to surprise on the upside," Nash said. "We had pretty decent reports on leading economic indicators and the housing market. ... That type of data is kind of fueling optimism that this is not going to be a flash in the pan recovery."
"The number of negative earnings [warnings] also have been quite minor," he added. "If anything, the consensus earnings expectations are heading up."
Michael Sheldon, chief market strategist at Spencer Clarke LLC, agreed.
"Overall, the market remains very healthy," he said. "Investors continue to buy into the market on pullbacks. The biggest risk we face is valuation, with many stocks reaching levels that already incorporate a significant rebound in the economy."
FedEx Corp fell US$2.35 to US$66.25 after Morgan Stanley lowered the company's stock rating to "equal-weight" from "overweight."
Palm Inc dropped US$1.52 to US$21.05 after the tech company narrowed its quarterly loss; however, revenue came in at the low end of forecasts.
Gainers included Nike Inc, which saw its shares climb to US$4.25 to US$61.50, after the athletic shoe maker reported quarterly profits that beat estimates by US$0.10 per share.
Advancing issues outnumbered decliners 5 to 4 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, a barometer of smaller company stocks, rose 0.74, or 0.1 percent, to 520.20.