U.S. stocks closed lower Friday as investors cashed in on profits made in the past 13 sessions and and bank issues slid on rekindled concerns about the struggling financial sector. Following a meeting of top US bankers with President Obama, JPMorgan Chase (JPM) CEO James Dimon told CNBC that March has been "a little tougher" than the first two months of 2009. A similar comment was reportedly made by Bank of America's (BAC) CEO.
The market consolidated its recent gains while bracing for pending earnings reports and next week's nonfarm payrolls report, says S&P MarketScope.
On Friday, the 30-stock Dow Jones industrial average finished lower by 148.38 points, or 1.87%, at 7,776.18. The broad S&P 500 index fell 16.92 points, or 2.03%, to 815.94. The Nasdaq composite index was lower by 41.80 points, or 2.63%, at 1,545.20. On the New York Stock Exchange, 23 stocks were lower in price for every seven that advanced. Breadth on the Nasdaq was 21-7 negative.
Treasuries were mixed and the dollar index surged following reports February personal income fell 0.2% and personal consumption expenditures rose only 0.2% after spurting 1.0% in January; and the University of Michigan Consumer Sentiment Index rose to 57.3 in March from a 56.6 preliminary reading and 56.3 in February.
Gold and crude oil futures finished lower.
The big focus for Wall Street next week will be on the release of the March employment report on Friday, Apr. 3. The median expectation of economists surveyed by Action Economics is for payrolls to drop by about 650,000. That would be about the same amount as in February. In addition, given another sharp increase in the unemployment rate for insured workers, analysts look for the overall jobless rate to jump to 8.4%, from 8.1%.
First-quarter results for KB Home (KBH) showed a 75 cent loss and 61% revenue drop, though orders for new homes rose 26%.
According to a Wall Street Journal report, City Center, the $8.6 billion Las Vegas development owned by MGM Mirage (MGM) and Dubai World, is preparing for a potential bankruptcy filing that could bring the massive project to a halt, according to people familiar with the situation.
President Barack Obama will seek support Friday from executives of the nation's largest banks for his plan to stabilize the financial system and try to get beyond the furor over bailouts and bonuses. Bloomberg reports the White House meeting at noon Washington time is scheduled to include chief executive officers Vikram Pandit of Citigroup (C), Jamie Dimon of JPMorgan Chase (JPM) and Lloyd Blankfein of Goldman Sachs Group (GS), all headquartered in New York. They are among as many as 15 banking executives expected to attend.
Lawrence Summers, Obama's top economic adviser, said the meeting was a measure of the ties between the government and banking industry at a time of economic crisis. "This is about our duty to do everything we can to support a robust and sustained economic expansion and the reality that the country's major financial institutions have a major role to play," Summers said.
Obama plans to announce a new aid package for General Motors (GM) and Chrysler in the coming days and says the carmakers must make "pretty drastic changes" to save their industry. The Associated Press reported Obama gave a preview of his administration's approach to fixing the struggling U.S. auto industry during an online town hall meeting Thursday, promising additional aid only if the Detroit change its ways and receives concessions from stakeholders.
The Financial Times reported that more conservative assumptions could force GM and Chrysler into further cost-cutting measures, such as plant closures. But people familiar with GM's revised survival plan said GM was not intending to ask for more aid from Washington in addition to the $13.4 billion it has received and its earlier request for another $16.6 billion.
In economic news Friday, U.S. consumer sentiment improved slightly to 57.3 in the final March reading of the Reuters/University of Michigan index, from 56.6 in the preliminary report. The index was 56.3 in February, and was 69.5 in March 2008. The current conditions index edged up to 63.3 from 62.3 in the preliminary (and 65.5 in February). The 6-month outlook index was little changed at 53.5 compared to the 53.0 preliminary (50.5 in February). The 1-year ahead inflation index slipped to a 2.0% pace from 2.2% in the preliminary (1.9% in February); it was 4.3% a year ago. The 5- to 10-year price index slowed 2.6% from the 2.8% preliminary (3.1% in February), and 2.9% a year ago.
"The data are fractionally better than expected, and add to the growing list of data that is suggesting the economy might be bottoming," says Action Economics.
U.S. personal income fell 0.2% in February, and consumption rose 0.2%. January's 0.4% income gain was revised lower to 0.2% (December was revised down to -0.3% from -0.2%). The 0.6% January increase in spending was revised up to 1.0% (the 1.0% decline in December was revised to -1.1%). Disposable income fell 0.1%, after jumping 1.6% in January (revised from 1.7%). The savings rate rose 4.2%. The PCE deflator was steady at a 0.3% pace (January's gain was revised up to 0.3%, from 0.2% previously). The core rate was also unchanged at a 0.2% clip (January's increase was revised up to 0.2% from 0.1%).