US stocks slumped on Friday after consumer sentiment deteriorated unexpectedly this month, stirring fears Americans may shut their wallets and prompting investors to lock in profits after three days of gains.
The benchmark S&P 500 ended the week nearly flat.
"There's some profit taking going on because we had a very nice run-up. There's nothing unusual about it," said Tim Heekin, director of trading at Thomas Weisel Partners in New York. "The path of least resistance is still up. Net equity inflows have turned positive year to date, and clearly we see institutional money being put to to work."
Since hitting this year's lows on March 11, the Dow has risen about 21 percent, the S&P 500 has gained 23 percent and the NASDAQ has added about 28 percent.
The Dow Jones industrial average fell 79.43 points, or 0.86 percent, to 9,117.12 on Friday. The broader Standard & Poor's 500 Index dropped 9.90 points, or 0.99 percent, to 988.61.
The technology-laced NASDAQ Composite Index was down 27.13 points, or 1.64 percent, at 1,626.49, based on the latest data.
Although economists had forecast a gain in the University of Michigan index of consumer sentiment, it fell to 87.2 this month from last month's 92.1.
More worrisome, the reading on consumers' outlook on the economy's future slumped to 84.2 this month from 91.4 last month, suggesting Americans find it hard to sustain the optimism that followed the end of the Iraq war.
Consumer confidence is viewed as a precursor to consumer spending, which drives two-thirds of the US economy.
"My view of this is it's healthy profit-taking and consolidation," said Gary Wedbush, head of trading at Wedbush Morgan.
"Markets don't go straight up. There's always something out there to assign a pullback to and the main one would be consumer confidence coming in lighter than expected," he said.
Volume was active, with about 1.26 billion shares changing hands on the New York Stock Exchange and about 1.82 billion traded on NASDAQ. Decliners outnumbered advancers by about 2 to 1 in both markets.
For the week, the Dow gained 0.60 percent, the S&P 500 edged up 0.09 percent and the NASDAQ dipped 0.06 percent.
Weighing on NASDAQ, Adobe Systems fell 12 percent, a day after the software maker forecast third-quarter results would be down from the second quarter. Shares sank US$4.43 to US$31.55. It was among NASDAQ's most actives.
Cree Inc. also weighed on NASDAQ after it said Eric Hunter, a founder of the semiconductor maker, filed a US$3 billion suit against the company and chairman Neal Hunter, his brother, charging they broke securities laws and threatened his family. Cree dropped 18.5 percent, or US$4.11, to US$18.10.
Intel Corp slid after Deutsche Securities cut its rating on the stock to "hold" from "buy," citing a lack of further near-term factors to drive its stock price higher and large recent gains racked up by semiconductor stocks. Intel fell 3.5 percent, or US$0.781, to US$21.359.
Among NASDAQ's most active names was the world's No. 2 software maker, Oracle Corp, which had better-than-expected earnings and offered a positive outlook. Oracle, locked in a hostile takeover bid for rival PeopleSoft Inc, rose 1.1 percent, or US$0.15, to US$13.48.
Shares of telecom equipment maker Lucent Technologies Inc were among the Big Board's big movers after The Wall Street Journal reported that US securities regulators have informed two former executives they may be subject to civil action related to aggressive sales tactics used three years ago. Lucent's stock fell 3.6 percent, or US$0.08, to US$2.14.
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