NEW YORK (CNN/Money) -
A weakened dollar coupled with rising oil prices punished stocks Friday by inviting investors to take their profits and run.
The Dow Jones industrial average (down 115.64 to 10,456.91, Charts) and the broader Standard & Poor's 500 (down 13.21 to 1,170.34, Charts) both fell by more than 1 percent.
The Nasdaq composite (down 33.65 to 2,070.63, Charts) index gave up some 1.6 percent.
For the week, the Dow is down 0.78 percent, the S&P 500 gave up 1.17 percent and the Nasdaq lost 0.68 percent.
The dollar fell to a four-year low against the yen, and lost ground against the euro, which rose back above $1.30. Federal Reserve Chairman Alan Greenspan expressed concern over the weakened dollar Friday, saying in Frankfurt that the United States needs to deal with its underlying causes.
"Basically, the market is fearful now that the Fed may need to be more aggressive in raising interest rates," said Peter Cardillo, chief market analyst at S.W. Bach.
Jack Ablin, chief investment officer at Harris Trust, added that Greenspan's remarks alerted foreign governments, as well as investors, that the Bush administration would not take steps to artificially inflate the greenback's value.
A weaker dollar, Ablin noted, gave rise to higher commodity prices Friday. U.S. light crude for January delivery jumped $2.22 to $48.44 a barrel on the New York Mercantile Exchange.
"To the extent that oil is denominated in the dollar and the dollar has gotten cheaper, it is going to cost more for oil," Ablin noted. "If you look at oil in terms of the euro, my guess is that oil is flat."
And COMEX gold rose $4.10 to $447.00.
Goldman Sachs socked the chip equipment makers with a ratings downgrade, further weighing on Applied Materials (down $0.66 to $16.99, Research) which warned earlier this week that its first-quarter orders would fall. It fell by 3.7 percent.
Banc of America Securities initiated coverage on Amazon.com (down $1.82 to $38.55, Research) with a "sell" rating, causing the shares to fall by 4.5 percent.
Sirius Satellite Radio (up $0.45 to $5.17, Research) was a bright spot for the Nasdaq, advancing by 9.5 percent after the subscription radio service named ex-Viacom (down $0.73 to $34.72, Research) president Mel Karmazin as its new CEO. Wachovia upped its rating on the shares following the news.
TheStreet.com (up $0.37 to $4.39, Research) also lent some support to the Nasdaq, rising 9.2 percent, on a Business Week report the financial news site may be up for sale. TheStreet.com is a CNN/Money.com competitor.
Drug stocks fell after testimony Thursday from an FDA official who criticized the agency's monitoring of drug safety and cited five drugs already on the market that he said may pose safety risks. Merck CEO Raymond Gilmartin spoke at the hearing over safety concerns of its Vioxx arthritis drug.
Merck (down $0.24 to $27.12, Research) fell by nearly 1 percent, Abbott Laboratories (down $0.62 to $42.75, Research) lost 1.4 percent, Pfizer (down $0.54 to $27.23, Research) and GlaxoSmithKline (down $0.82 to $42.77, Research) eased by nearly 2 percent, while AstraZeneca (down $0.93 to $39.43, Research) fell 2.3 percent.
A solid fourth-quarter report from Disney provided little comfort to the struggling Dow. Late Thursday, the world's second largest entertainment company said its net earnings jumped 24 percent in the quarter and that its full-year earnings surged 85 percent.
Disney (up $0.29 to $26.66, Research) rose by more than 1 percent.
Nike (down $2.50 to $82.50, Research) announced late Thursday that its co-founder Philip Knight will step down as chief executive officer. The stock eased by nearly 3 percent.
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Market breadth was negative. On the New York Stock Exchange, decliners trumped winners 23 to 9 on volume of 1.51 billion shares. On the Nasdaq, losers beat winners 21 to 10 on volume of 2.06 billion shares.
Treasury prices slumped, lifting the 10-year note yield to 4.20 percent from 4.12 percent late Thursday. Bond prices and yields move in opposite directions.
Japanese stocks ended little changed, and European indexes closed lower.