NEW YORK (CNN/Money) -
U.S. stocks tanked Friday, with the major indexes eroding after hitting new yearly highs earlier in the week and in response to a lukewarm mid-quarter update from Intel and a smaller-than-expected monthly payrolls number.
The Dow Jones industrial average (down 68.14 to 9862.68, Charts) lost 0.7 percent, the Standard & Poor's 500 (down 8.22 to 1061.50, Charts) index lost almost 0.8 percent and the Nasdaq composite (down 30.98 to 1937.82, Charts) lost almost 1.6 percent.
The declines were enough to push the Nasdaq lower on the week, down 1.1 percent. The Dow and the S&P 500 both managed a higher weekly tally, thanks to early-week gains. The Dow added 0.8 percent this week, while the S&P 500 added 0.3 percent.
There are no new economic reports due Monday, but Tuesday brings the latest interest rate decision from the Fed, as well as the October reading on wholesale inventories and a mid-quarter update from Texas Instruments after the bell.
The Fed is widely expected to hold rates steady at a more than 40-year low when it meets Tuesday to set interest rates. (For a more in-depth look at the Fed's upcoming meeting, click here.)
Despite the declines Friday and the mixed week, the market still has the potential to gain a bit through the end of the year.
"In the next few weeks, if the [earnings] pre-announcement period goes smoothly, which I think it will, and the economic news keeps showing improvement, I think we can make some gains," said Donald Selkin, director of research at Joseph Stevens. "I don't think we're going to rip-roar higher, but I think we could still make some choppy gains through the end of the year, maybe hit those psychological round numbers by the end of the year -- 2,000 on the Nasdaq, 10,000 on the Dow."
The major indexes bumped up against their strongest levels in more than a year earlier this week, making them vulnerable to pullbacks. On Thursday, the Dow closed at a new 18-month high, and the Nasdaq traded at a new 22-month high in intraday trading earlier in the week. The S&P 500 also is not far from a new 18-month high.
As a result, investors jumped on the less than over-the-moon news from Intel and the arguably subdued employment picture, using them as an incentive Friday to take profits after the rally. The declines started in technology but were fairly broad-based by the close, with 27 of the 30 Dow stocks closing lower.
"We're seeing a little selling today, but I think it's important to remember that we just hit an 18-month high on the Dow, and so we're going to see a little pullback short-term," said Timothy Ghriskey, president at Ghriskey Capital Partners.
On the move
Late Thursday, as expected, Intel (INTC: down $1.44 to $32.10, Research, Estimates) narrowed its revenue forecast for the current quarter to the upper end of the previously given range, saying it now expects to post revenue between $8.5 billion and $8.7 billion, up from a previous range of $8.1 billion to $8.7 billion.
However, the company also said it will take a $600 million, or 6-cent-per-share, charge in the current quarter due to weakness in its wireless business.
The stock fell 4.2 percent, with investors focusing on the charge and the fact that Intel didn't boost its revenue range even higher, which might have provided some psychological confirmation of a corporate profits recovery.
"Expectations were so high for Intel that they couldn't help but disappoint," Ghriskey added.
Other chipmakers, such as Advanced Micro Devices (AMD: down $0.59 to $16.07, Research, Estimates), also slid sharply. The Philadelphia Semiconductor (down 16.44 to 498.86, Charts) index, or the Soxx, fell 3.2 percent.
Similarly, a largely positive monthly jobs report was met with disappointment. The unemployment rate fell to 5.9 percent in November from 6.0 percent in October, when economists expected it to hold steady. However, employers added only 57,000 jobs last month, down from an upwardly revised 137,000 in October. Economists were expecting employers to add 150,000 jobs to their payrolls.
"The silver lining on this is that it confirms that the Federal Reserve will not be raising interest rates anytime soon, which is good news for the market," said Donald Selkin, director of research at Joseph Steven.
Among other stock movers, the airline sector declined after shares of discount airliner JetBlue Airways (JBLU: down $5.52 to $25.86, Research, Estimates) fell 17.6 percent in active Nasdaq trade after the company cut its forecast for fourth-quarter operating margins late Thursday, citing the California wildfires and lower airfares. Following the news, Bear Stearns trimmed its fourth-quarter earnings forecast for JetBlue, and Lehman Brothers trimmed earnings estimates for the fourth quarter and 2004 for the entire sector.
The Amex airline (down 2.48 to 57.90, Charts) index fell 4.1 percent.
Market breadth was negative, with losers edging gainers eight to seven on the New York Stock Exchange, where around 1.22 billion shares changed hands. On the Nasdaq, on volume of around 1.64 billion shares, declining issues outnumbered advancers by nearly two to one.
Treasury bonds rallied following the lukewarm employment report and sustained those gains throughout the session. The 10-year note gained 1-4/32 points in price, its yield falling to 4.22 percent from 4.36 percent late Thursday. The dollar continued to fall against the euro and the yen.
NYMEX light sweet crude oil futures fell 53 cents to $30.73 a barrel. COMEX gold rose $3.10 to settle at $407.30 an ounce.
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