Stocks slightly higher after 3-day downturn
(AP) - The rally that has driven stocks to record highs paused this week as investors try to figure out where things are headed next.
Stocks rose slightly on Friday, but not enough to avoid their second weekly loss in a row. Indexes reached record highs as recently as Monday, but then declined.
How come? Investors may be nervous that stocks are overpriced, that stock prices have grown faster than justified by profits. They may be worried about conflict with Iran, or the debate over federal spending. Some are worried the Federal Reserve will decide next week to reduce its economic stimulus, which has boosted stock prices.
"It's a hiatus," said Frank Fantozzi, CEO of money management firm Planned Financial Services. "I really think there's nothing economically wrong."
Fantozzi noted that other bull markets have run for seven or eight years and peaked with higher prices compared to profits than what we're seeing now.
With half an hour before markets close, the Dow Jones industrial average was up 48 points, or 0.3 percent, at 15,787. The Standard & Poor's 500 index was up three points, or 0.2 percent, at 1,778. The Nasdaq composite rose nine points, or 0.2 percent, to 4,007.
All three indexes are still down for the week despite strong reports on employment, housing, and retail spending. Investors have been worried that the stronger the Fed thinks the economy is, the more likely it is to stop buying $85 billion per month in bonds. The purchases have been aimed at keeping interest rates low, which makes it cheaper to borrow.
That has sent investors into stocks as they seek higher returns. The big indexes are up 20 percent or more this year.
The central bank's policymaking committee meets next week and will release a statement on announce any decisions on Wednesday.
Guessing when the stimulus will end has become a parlor game for investors, who are stuck between betting that it will end soon, meaning stocks could decline, versus betting that it will continue, bringing the bull market along with it.
Scott L. Wren, a senior equity strategist at Wells Fargo Advisors, believes the Fed will telegraph its intentions well in advance. Since they haven't done that yet, it suggests they won't act until the spring, he said. He also thinks the Fed could reduce its stimulus very slowly, easing the pain for financial markets.
"The Fed wants to err on the side of caution, and not do anything too crazy," he said.
Half of the 10 industry groups in the S&P 500 rose, let by consumer discretionary stocks. Stocks with declines included energy and technology stocks, as Apple, Google, and Microsoft all dipped.
Anadarko Petroleum fell $6.27, or 8 percent, to $77.40 after a federal bankruptcy judge said the company may be liable for between $5 billion and more than $14 billion in a legal battle over the spinoff of a paint materials company. The ruling isn't final.
Software maker Adobe Systems jumped 12 percent after subscription-based revenue rose. Adobe rose $6.40 to $60.39.
Video game maker Electronic Arts rose $1.26, or 6 percent, to $22.23 after early reports showed strong sales of new video game consoles from Sony and Microsoft.
Markets outside the U.S. were tentative, too. Asia's heavyweight market benchmark, Tokyo's Nikkei 225, rose 0.4 percent. In Europe, indexes in London, France, and Germany had small losses.
Benchmark crude oil fell 90 cents to $96.60 on the New York Mercantile Exchange.
The yield on the 10-year Treasury note fell slightly to 2.87 percent.
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