NEW YORK (CNN/Money) -
U.S. stocks tumbled Friday, with selling picking up steam near the close, as the market continued to consolidate after Wall Street's strong multi-month run. The major indexes closed in the red for the second week in a row.
On Friday, the Dow Jones industrial average (down 109.18 to 10186.60, Charts) fell just over 1 percent, while the Standard & Poor's 500 (down 12.54 to 1109.78, Charts) index and the Nasdaq composite (down 21.97 to 1940.47, Charts) both lost 1.1 percent. Bonds and the dollar both fell.
The latest news on the battle in Pakistan between government forces and al Qaeda fighters and the impact of Friday's quadruple options expiration were in focus. But from a longer-term perspective, the market continued to struggle at the end of the second week of declines, which followed seven weeks of rangebound trading.
Stocks have had a tumultuous week, with the major indexes tumbling Monday in an extension of the previous week's selloff, rallying Tuesday and Wednesday after the Fed kept interest rates unchanged and its statement almost unchanged from the previous policy meeting. Thursday was mixed to lower and Friday was all over the place before settling much lower.
The skittish trade is likely an extension of the previous eight weeks, analysts said, in which the stock markets have moved sideways to lower in what traders are calling a period of consolidation after the strong rally of 2003 and early 2004.
For the week, the Dow lost 0.5 percent, the S&P 500 lost 0.9 percent and the Nasdaq lost 2.2 percent.
"The market's moving sideways, consolidating," said John Hughes, a market analyst at Shields & Co. "It's too early to tell if this is a low and you can jump back in, so you're seeing some investor caution."
What's likely to preoccupy markets in the short run, Hughes said, is the start of the earnings reporting period and the next monthly payrolls tally, both expected in early April.
Next week is light on earnings news, with the exception of Goldman Sachs (GS: Research, Estimates) on Tuesday, Micron Technology (MU: Research, Estimates) on Wednesday and A.G. Edwards (AGE: Research, Estimates) on Thursday.
A number of economic reports are due later in the week, including reports on personal income and spending, new and existing home sales and the revised readings of gross domestic product growth and consumer sentiment.
What moved
Selling was fairly broad-based, with 24 out of 30 Dow stocks declining. Intel (INTC: down $0.71 to $26.49, Research, Estimates), IBM (IBM: down $1.23 to $91.62, Research, Estimates), General Motors (GM: down $1.24 to $45.10, Research, Estimates) and Exxon Mobil (XOM: down $0.96 to $41.50, Research, Estimates) were among the biggest decliners.
Additionally, Dow component United Technologies (UTX: down $2.43 to $85.40, Research, Estimates) continued to slide, losing 2.8 percent one session after the company reaffirmed its forecast, but did not raise it, as some analysts had hoped. Additionally, Friday, McDonald Investments downgraded the stock to "hold" from "buy."
On the upside, Adobe Systems (ADBE: up $3.58 to $39.85, Research, Estimates), a graphics design software maker, rallied almost 10 percent after the company released its results late Thursday. The company reported higher-than-expected first-quarter earnings that grew from a year earlier and also raised its full-year 2004 forecast.
Ciena (CIEN: up $0.09 to $5.06, Research, Estimates) rose 1.8 percent after an upgrade by UBS to "neutral" from "reduce.
The battle between Pakistani troops and al Qaeda fighters near the Pakistan-Afghanistan border continued Friday. Intelligence indicates that the fighters are protecting Ayman al-Zawahiri, al Qaeda's second in command after Osama bin Laden. (For more on this developing story, go to CNN.com.)
The "quadruple witch" also cast a spell as Friday was a session in which stock index options and futures and individual stock options and futures all expired. This process can often create volatility during the session, especially near the open and close. This week, some of that volatility also spilled into the sessions leading up to the expirations.
Market breadth was negative. On the New York Stock Exchange, where 1.43 billion shares traded, losers outnumbered gainers by more than three to two. On the Nasdaq, decliners also beat advancers by three to two on volume of 1.62 billion shares.
Treasury prices crept lower, pushing the 10-year note's yield up to 3.77 percent from 3.75 percent late Thursday. The dollar was higher versus the euro and lower versus the yen.
Among commodities markets, NYMEX light sweet crude oil futures rose 23 cents to settle at $37.62 a barrel. COMEX gold gained $1.40 to settle at $412.70 an ounce.
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