US stocks sagged on Friday and ended the week lower on disappointing corporate earnings and mixed economic data, but bonds rose as investors expected the Federal Reserve to keep interest rates steady for the time being.
Gold again rallied toward the gleaming US$400 target but again fell short. The dollar slipped against the euro but rose against the yen. Oil gained for the sixth session in a row.
Investors locked in profits on big gains made earlier in the week, with computer chip and biotechnology shares hit the hardest, after the day's economic reports failed to give a sure sign that the economic rebound was gaining momentum.
"People want better evidence of true strength in the future to make another wave of commitments. Right now, the markets want something extra special because of [high] valuations," said Paul Cherney, chief market analyst at Standard & Poor's Marketscope.
But strong gains in the beaten-down drug stocks such as Johnson & Johnson and Merck & Co Inc helped stem the day's losses.
The blue-chip Dow Jones Industrial Average dropped 69.26 points, or 0.7 percent, to 9,768.68 points in active trading.
The broader Standard & Poor's 500 Index fell 8.06 points, or 0.76 percent, to 1,050.35.
The technology-laced NASDAQ Composite Index slid 37.09 points, or 1.89 percent, to 1,930.26.
For the week, the Dow fell 0.4 percent, the S&P 500 roughly 0.3 percent and the NASDAQ 2.1 percent. The stock markets' surge from this year's lows in March has left some investors concerned that much of the US economic rebound is already priced in.
In the latest economic reports, US retail sales dipped in October as auto demand dropped, the government reported. Separate data showed that US consumer confidence surged more than expected early this month, and surprisingly, last month's US wholesale prices had their biggest gain in seven months.
BEA Systems Inc skidded US$1.46, or 10 percent, to US$12.64. The software company said quarterly profit rose 17 percent on higher services revenue, but key software license revenue came in lower than Wall Street estimates.
The NASDAQ Biotechnology Index sank about 4 percent, eroding virtually all of the gains it had made since Tuesday.
Microchip production gear maker Applied Materials Inc, fell US$1.26, or 5 percent, to US$23.48. The Philadelphia Stock Exchange's semiconductor index fell 3 percent.
But shares of large drugmakers extended this week's rally as investors cheered Congress' movement toward a plan for Medicare to cover prescription drugs for the elderly and disabled.
Johnson & Johnson rose US$2.02, or 4 percent, to US$52.12; Pfizer Inc added US$0.63, or 2 percent, at US$34.08; Merck & Co Inc rose US$0.78, or 2 percent, to US$46.58; Bristol-Myers Squibb edged up US$0.56, or 2 percent, to US$26.52; and Eli Lilly & Co advanced US$2.23, or 3 percent, to US$71.28.
Bond prices have firmed this week as the Fed's staunch stand on interest rates offset some positive economic data, including an October jobs report earlier in the week.
Philadelphia Federal Reserve Bank president Anthony Santomero said on Friday that low inflation and excess capacity would limit the Fed's need to raise rates for now.
The benchmark 10-year Treasury note rose 20/32 to yield 4.22 percent, down from 4.27 percent late Thursday.
Two-year notes were up 5/32 to yield 1.81 percent. The 30-year bond rose 26/32 for a yield of 5.06 percent, down from 5.11 percent.
COMEX gold stayed at 7-and-a-half year highs in heavy, volatile trading on worries about the dollar and US troubles in Iraq.
December gold settled up US$3.70 at US$398.00 an ounce.
Commodity trading advisors and other funds have been buying heavily, and many just want to see US$400 flash on the board for the first time since March 1996.
Silver rode gold's coattails to US$5.415 an ounce, its highest level in more than 3 years.
The dollar tumbled to a 3-week low against the euro after the mixed economic signals.
The euro was up 0.37 percent on the day at US$1.1770. But against the yen, the dollar rose 0.19 percent to ¥108.36.
NYMEX crude oil futures ended near 5-week highs, extending gains for a sixth straight session, as a steady flow of fund buying continued, a day after government data showed a small drop in US crude stocks last week.
NYMEX December crude settled 47 cents higher at US$32.37 a barrel.
In London, stocks closed at their highest level in 14 months, encouraged by US economic data and drug stocks. The FTSE 100 index finished higher for a fourth straight day, up 24 points, or 0.5 percent, at 4,397.0.
But in Tokyo, the benchmark Nikkei average closed at a 3-month low, down 1.65 percent at 10,167.06.
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