Dow and S&P 500 down on day, week

Wall Street struggles as investors eye economic reports, sliding oil prices, a weaker dollar.

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By Alexandra Twin, senior writer

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NEW YORK ( -- The Dow and S&P 500 slipped Friday and closed lower for the second week in a row, while the Nasdaq ended higher on the day and week.

The Dow Jones industrial average (INDU) fell 34 points, or 0.4%. The S&P 500 (SPX) index lost 1 point, or 0.1% and the Nasdaq (COMP) gained 8 points, or 0.5%.

Stocks bounced back Thursday, after sliding for most of the week. But they failed to extend that recovery attempt Friday, as the spring surge that pushed the S&P 500 up by 40% continues to lose steam.

The Dow and S&P 500 have now closed lower for the last two weeks, while the Nasdaq managed to post slim gains for the week.

Bets that the economy is closer to stabilizing gave the rally some fuel, but a mixed batch of recent reports has caused worries that the market has gotten ahead of any recovery.

Friday's economic news added to those concerns, after a government report showed personal income surged, but so did savings, as investors opted to sit out the recession rather than spend.

With consumer spending fueling two-thirds of economic growth, the steadily rising savings rate has been a cause of concern for economists.

Economy: May personal income rose 1.4%, the Commerce Department reported Friday. Economists surveyed by thought it would be up just 0.3% after climbing a revised 0.7% in April.

But the gain in personal spending was more modest, the government said. Spending rose 0.3% in May, in line with forecasts, after falling 0.1% in April.

Rather than spend, consumer beefed up their savings. Personal saving as a percentage of income rose to 6.9% in May from 5.6% in April. The rate was the highest level in more than 15 years.

The PCE deflator, the report's inflation component, showed that pricing pressures remain moderate. PCE rose 0.1% after rising 0.3% in April, versus forecasts for a rise of 0.2%.

A separate report from the University of Michigan showed consumer sentiment rose to 70.8 in June from an earlier reading of 68.7. Economists thought it would increase to 69.

Corporate news: KB Home (KBH) reported a narrower fiscal second-quarter loss that was worse than expected. The homebuilder also said that it sees signs that certain negative trends are moderating. Shares plunged 9% Friday.

Similarly, on Thursday, homebuilder Lennar (LEN) reported a big drop in fiscal second-quarter sales and earnings versus a year ago, but said new home sales and orders picked up versus the first quarter.

In other company news, Palm (PALM) reported a narrower-than-expected fiscal fourth-quarter loss late Thursday, due partly to strong demand for its new Pre smartphone. Shares rallied nearly 16%.

Market breadth was positive and volume was heavy, due to the annual rebalancing of the Russell indexes. On the New York Stock Exchange, winners beat losers by three to two on volume of 2.35 million shares. On the Nasdaq, advancers topped decliners two to one on volume of 3.65 billion shares.

Bonds: Treasury prices were little changed, with the yield on the benchmark 10-year note at 3.54%, roughly where it stood late Thursday. Treasury prices and yields move in opposite directions.

Other markets: In global trade, Asian markets ended higher and European markets ended mixed.

COMEX gold for August delivery settled up $1.50 to $941 an ounce.

U.S. light crude oil for August delivery settled down $1.07 to $69.16 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar fell versus the euro and the yen. To top of page

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