Stocks skid for 3rd day
Wall Street finishes lower for third straight session. Worries about consumers and more weakness in bank stocks scare investors.
NEW YORK (CNNMoney.com) -- Stocks slid Friday, falling for the third straight session, as investors abandoned an early rally attempt as J.C. Penney's profit warning and churning in the financial sector kept economic fears in focus.
The Dow Jones industrial average (INDU) lost 0.7%, while the broader Standard & Poor's 500 (SPX) index lost 0.8%. The Nasdaq composite (COMP) lost nearly 0.9%.
Stocks rose through the early afternoon as investors welcomed a report showing a rise in personal income and tame inflation - as well as falling oil and gold prices. But the gains were tepid and the advance petered out as the session progressed.
It was the third down day in a row for stocks, with investors unable to extend a gain over more than a week.
Greg Church, president at Church Capital said the J.C. Penney news was demonstrating that the consumer continues to face substantial headwinds. And the weakness in banks remains a broad overhang.
"Financials are still getting whipsawed and that's going to make it harder to see a higher market," Church said.
It's been a tough quarter, with the Dow down just under 8% as of Friday, the S&P 500 down 10.4% and the Nasdaq down 14.7%. (Full story).
Next week brings a heavy spate of economic news, including readings on manufacturing and construction spending, factory orders and employment.
Economic news. The day brought some mixed news about the health of the consumer, a worry amid signs that that the economy is in a recession, or heading toward one. Consumer spending fuels around two-thirds of economic growth.
Personal income rose 0.5% in February, the government reported, beating economists' forecasts. But spending rose just 0.1%, the smallest rise since September 2006. Meanwhile, retailer J.C. Penney issued a profit warning.
On the upside, core PCE, the spending report's inflation component, rose 0.1%, in line with expectations. That left PCE at 2% over the last 12 months, within the 1% to 2% range for inflation at which the Fed is said to be comfortable.
Separately, the Fed announced that it would make an additional $100 billion available to cash-deficient banks during the month of April, as part of its ongoing plan to help unfreeze the credit markets.
A morning report showed that consumer sentiment fell to 69.5 in March from a previous reading of 70.5 and down from 70.8 in February.
Company news. Department store operator J.C. Penney (JCP, Fortune 500) warned that first-quarter earnings won't meet forecasts, due to sagging consumer demand amid the economic slowdown. Shares slumped 7.5%.
Citi Investment Research upgraded Lehman Brother (LEH, Fortune 500)s to "buy" from "hold," saying the company is attractively valued after the recent selloff and is in good shape in a tough environment. Lehman shares fell around 2.2%.
But other big financial stocks declined, after Oppenheimer & Co. analyst Meredith Whitney said that many banks will likely cut their dividends after reporting first-quarter earnings, including Citigroup (C, Fortune 500). The influential analyst also said that stock prices aren't yet fully reflecting the impact of the credit crunch and that bank stocks could lose another 25%.
Bear Stearns (BSC, Fortune 500) Chairman James Cayne dumped his entire stake in the investment bank for $61 million a day after JP Morgan Chase (JPM, Fortune 500) revised its buyout bid up to $10 a share from the initial $2 a share offer. The move suggested that the bid is unlikely to be revised higher again, sending Bear stock 4% lower Friday.
Apollo Group (APOL) tumbled roughly 27% after the for-profit education company reported lower quarterly earnings that missed expectations due to what it said were promotional costs.
Radio station operator Clear Channel (CCU, Fortune 500) warned in a regulatory filing that the private equity firms that are trying to buy the company may not be able to close the deal because the banks won't provide the financing. Shares lost 1.4%.
Homebuilder KB Home (KBH, Fortune 500) reported a fiscal first-quarter loss versus a profit a year earlier as a result of taking a large writedown connected to falling home prices. Shares fell almost 5%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners two to one on volume of 1.35 billion shares. On the Nasdaq, decliners topped advancers 2 to 1 on volume of 1.80 billion shares.
Commodities. U.S. light, crude oil for May delivery fell $1.96 to settle at $105.62 a barrel on the New York Mercantile Exchange. Oil prices hit a record $111.80 in electronic trading last week.
COMEX gold for April delivery fell $18.20 to settle at $930.60 an ounce. Gold hit an all-time trading high of $1,033.90 an ounce one week ago.
Other markets. The dollar fell versus the euro and the yen.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.44% from 3.53% late Thursday. Bond prices and yields move in opposite directions. 
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