Investors took a cautious approach to mostly positive US economic data this week, bidding stocks lower on concerns about Greece and the prospects of tightening US monetary policy.
For the week, the Dow Jones Industrial Average dropped 161.22 points (0.9 percent) to 17,849.46.
The broad-based S&P 500 shed 14.56 (0.69 percent) to 2,092.83, while the tech-rich NASDAQ Composite Index slipped 1.57 (0.03 percent) to 5,068.46.
Analysts kept an eye on other markets that experienced greater volatility compared with stocks. The 10-year US Treasury market finished the week at 2.41 percent late on Friday, up from 2.1 percent a week ago.
“There’s been more volatility in the commodities, the currency, the bond markets than in the US stock market, and there is the concern that volatility may come back in line by way of the US stock markets correcting more,” Ventura Wealth Management portfolio strategist Tom Cahill said.
Stocks were also shadowed by the seemingly endless talks between Greece and international lenders. The IMF agreed to let Greece bundle a series of payments totalling 1.6 billion euros (US$1.8 billion) until the end of the month, to buy time to complete negotiations.
However, Greek Prime Minister Alexis Tsipras late on Friday called on creditors to drop “absurd” demands on the debt-wracked country.
“The deadline is quickly approaching for Greece and that’s going to come to a head soon,” BMO Private Bank chief investment officer Jack Ablin said.
A torrent of economic news culminated in Friday’s jobs report, which showed the US economy added a surprisingly lofty 280,000 jobs last month amid solid wage growth.
Reports earlier in the week included a big drop in the US trade deficit in April, slower growth in the US services sector last month and a jump in consumer sentiment. US auto sales surprised on the upside last month, and the US Federal Reserve’s “Beige Book” reported better growth in April and last month after the economy stalled in the first quarter of the year.
Ablin said the overall tone suggests the “first quarter pullback was temporary,” but that the good news does not necessarily bode well for stocks.
“The bottom line on US equities is we’ve got an expensive market that’s being fueled by Fed liquidity and so any prospects of having the Fed turn down the spigot is a threat to equity values,” Ablin said.
The week’s most downcast report came from the IMF, which projected the US economy would grow only 2.5 percent, compared with the fund’s previous forecast of 3.1 percent growth.
The tepid outlook was accompanied by a plea from IMF managing director Christine Lagarde that the Fed hold off on a rate hike, which has been anticipated for as early as next month, saying growth conditions are not yet firm enough for it.
Among corporate stories, the week’s biggest deal was chipmaking giant Intel’s plan to acquire the much-smaller Altera for US$16.7 billion, accelerating a wave of consolidation in the semiconductor industry.
Several reports also pointed to talks between wireless carrier T-Mobile US and pay-television company Dish Network.
Next week’s economic calendar is quieter after the data deluge the last five days. The most eagerly anticipated report is last month’s retail sales.
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