US stocks fell for a third week after comments from the Federal Reserve and inflation data renewed concern the central bank may step up its pace of interest-rate increases. Financial shares including Citigroup Inc and Bank of America Corp paced the drop.
"The Fed seems to have made it clear that they are going to raise rates and there is the risk that they might get more aggressive about it," said Michael Panzner, head of sales trading at RABO Securities USA Inc in New York. "Their language seemed to have a bit more of a hawkish edge to it, which seemed to give some traders the willies."
Energy companies such as Exxon Mobil Corp dropped as oil prices retreated from record highs. Increased profit forecasts from companies such as General Electric Co and Northrop Grumman Corp kept stocks from sliding further.
In the holiday-shortened week, the Standard & Poor's 500 Index declined 1.5 percent to 1,171.42, the Dow Jones Industrial Average retreated 1.8 percent to 10,442.87 and The NASDAQ Composite Index slipped 0.8 percent to 1991.06.
Benchmark indexes posted a third straight week of losses for the first time since January. Exchanges were closed on Friday for Good Friday.
Rising borrowing costs have dragged the S&P 500 and the Dow average lower after both reached three-and-a-half-year highs earlier this month. The S&P 500 has lost 2.9 percent since March 14, when the yield on 10-year Treasury notes rose above 4.5 percent. Higher yields give investors a reason to favor bonds over stocks and spur concern that rising rates will weigh on corporate profit growth.
The Fed on March 22 made the seventh quarter-point increase in its benchmark rate since June to 2.75 percent and said "pressures on inflation have picked up in recent months." It restated a plan to carry out further increases at a "measured" pace, a sign to some strategists the Fed may boost rates at each of its six remaining meetings this year.
A slide in oil futures left an index of energy companies with the steepest decline among the S&P 500's groups. Even after this week's 4.5 percent drop, oil and gas producers have soared 47 percent in the past 12 months, more than double the gain of the next-best performing group.
Crude oil for May delivery this week fell 4.2 percent to US$54.84 a barrel in New York. The record closing price for a contract closest to expiration was US$56.72 a barrel on March 18.