Tech leads Wall Street selloff
Nasdaq declines as chips, computer networkers slide; Dow also drops on hawkish Fed comments, near $60-a-barrel oil and jump in Treasury yields.
NEW YORK (CNNMoney.com) -- Stocks tumbled Friday amid a steep selloff in the influential chip sector and a rash of hawkish comments from Federal Reserve officials.
Oil prices near $60 a barrel and a jump in Treasury bond yields added to the weakness.
The Dow Jones industrial average (down 56.80 to 12,580.83, Charts) closed about 0.5 percent lower, according to early tallies. The broader S&P 500 (down 10.25 to 1,438.06, Charts) index lost 0.7 percent and the Nasdaq (down 28.85 to 2,459.82, Charts) composite lost 1.2 percent.
For the week, the Dow and Nasdaq each lost about 0.6 percent, while the S&P shed about 0.7 percent.
Early next week, traders will take the nation's economic pulse with reports on the trade balance due Tuesday and retail sales due Wednesday. Housing starts and the inflation-gauging Producer Price Index are set for release Friday.
In addition, Federal Reserve Chairman Ben Bernanke gives his semi-annual testimony before Congress on Wednesday and Thursday.
"Next week we have Bernanke speaking and a lot of economic news, and anything that adds to worries that the Fed is likely to raise interest rates could cause a problem for investors," said Joseph Saluzzi, co-head of equity trading at Themis Trading.
In earnings news, KB Home is set to report Tuesday before the bell and Applied Materials after the close. Coca-Cola is expected to announce quarterly results Wednesday morning.
With 75 percent of the S&P 500 having already reported December quarter results, earnings are currently on track to have risen 10.9 percent versus a year ago, according to the latest Thomson Financial figures.
The tone was mixed in the early going as investors sorted through a range of company earnings, deals and brokerage actions, as well as comments from several Fed officials.
But the mood turned more negative in the afternoon, with a number of technology stocks tumbling, dragging down the Nasdaq and weighing on the broader market.
However, the sector may have also suffered some profit-taking after rising in the morning anyway on a pair of analyst upgrades.
"They were all upgraded in the morning, and in the afternoon they took a bath," said Art Hogan, chief market analyst at Jefferies & Co.
In addition, comments from a trio of Fed officials didn't help.
Investors also kept an eye on oil prices, which inched past the $60-a-barrel line during intraday trade, a key psychological level.
U.S. light crude oil for March delivery closed up 18 cents at $59.89 a barrel on the New York Mercantile Exchange.
Oil prices had slipped to below $50 a barrel in mid-January but have been creeping back up since then.
On the move
Fellow automaker DaimlerChrysler (up $1.34 to $64.09, Charts) was upgraded by Citigroup, Briefing.com reported. In addition, the company said it sold about a third of its stake in Airbus parent EADS to a private investment group for about $1.95 billion.
Investors also kept an eye on Fortress Investment Group (Charts), which finished trading Friday up 68 percent from its initial public offering Thursday. The first hedge fund in the United States to list priced its IPO at $18.50-a-share Thursday, at the top of its range.
British bus company FirstGroup said it was buying U.S. company Laidlaw International (up $2.86 to $34.58, Charts), the operator of Greyhound buses, for $2.8 billion. Laidlaw shares gained 9 percent in active New York Stock Exchange trading.
MasterCard (down $11.14 to $103.60, Charts) reported fourth-quarter earnings that rose from a year earlier and topped estimates. However, investors focused on the company's cautious comments about gross margin growth in 2007 and sent shares lower.
Alcatel-Lucent (down $0.37 to $13.30, Charts) shares slipped after the company reported a fourth-quarter loss versus a profit a year earlier. The telecom gear-maker also said that it would cut 12,500 jobs during the next three years, more than the 9,000 expected.
Juniper Networks (down $0.87 to $19.21, Charts) and Cisco Systems slumped, too, combining with Alcatel-Lucent (down $0.37 to $13.30, Charts) to drag down the Amex Networking (down 4.88 to 248.47, Charts) index by nearly 2 percent.
A variety of technology stocks tumbled in the afternoon, including a variety of chip stocks.
Chips had risen in the morning after JP Morgan and Deutsche Bank put out upbeat notes on the sector. But the advance petered out in the afternoon tech selloff.
The Philadelphia Semiconductor (down 6.49 to 463.19, Charts) index, or the SOX, lost 0.7 percent.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 2 to 1 on volume of 1.63 billion shares. On the Nasdaq, decliners beat advancers by almost 2 to 1 on volume of 2.2 billion shares.
Fed officials warn on inflation
Also in focus: comments from several Federal Reserve officials.
St. Louis Fed President William Poole, a voting member of the policy committee, said Friday morning that inflation should moderate this year, but if it doesn't, he would push for further tightening.
The comments were essentially echoed later in the morning by Cleveland Fed President Sandra Pianalto, who said that she was not yet convinced that inflation has moderated and, as a result, more rate hikes may be needed.
Dallas Fed President Richard Fisher, speaking in the afternoon, said that he is pretty comfortable with the inflation outlook, but that he wouldn't rule out more rate hikes. Neither Pianalto nor Fisher are voting members of the policy committee in 2007.
Separately, the Federal Reserve Board said voting member Susan Schmidt Bies will resign effective March 30. The board has not yet said who will replace her.
Treasury prices slumped, raising the yield on the benchmark 10-year note to 4.78 percent from around 4.73 percent late Thursday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar rose versus the euro and yen as the G7 meeting in Germany got underway.
COMEX gold for April delivery rose $9.50 to settle at $672.30 an ounce.