Stocks End Week on a Down Note

Indexes fell Friday despite better than expected earnings from Microsoft and Amazon. Dow 10,000 is proving a tough nut to crack

U.S. stocks finished a volatile week with losses Friday as a drop in energy futures weighed on oil issues while the broader market ran into profit taking despite stronger-than-expected earnings data from Microsoft (MSFT) and Amazon.com (AMZN), and a 9.4% surge in September existing home sales.

Investors showed signs of concern about the market's current levels amid uncertainty about the economy's recovery pace, and apparently used the positive headlines as an excuse to cash in on some of the market's gains over the last seven months.

On Friday, the 30-stock Dow Jones industrial average finished lower by 109.13 points, or 1.08%, at 9,972.18. The broad Standard & Poor's 500-stock index was down 13.31 points, or 1.22%, at 1,079.60. The tech-heavy Nasdaq composite index fell 10.82 points, or 0.50%, to 2,154.47.

On the New York Stock Exchange, 23 stocks were lower in price for every seven that advanced. Breadth on the Nasdaq was 20-6 negative.

Treasuries fell after Federal Reserve Chairman Ben Bernanke urged Congress to tackle regulatory reform. Meanwhile, a dispatch from FT.com speculated that the Fed may be making changes to the language of its policy statement as it prepares for the eventual removal of policy accomodation.

The dollar index rose, sending gold futures lower.

"The market isn't responding [to good news] the way it was earlier," says Peter Cardillo, chief market economist at Avalon Partners. One reason is that investors are already expecting corporate earnings, guidance and even sometimes revenue to be better than expected, he says.

But, Cardillo adds, economic news expected next week could continue to push the market higher.

"It's taking a little breather here," Cardillo said of the stock market's rally. "There isn't a rush to sell stock, and there isn't a rush to buy stocks – which is a perfect setting for a consolidation phase before we move higher again."

Richard Sparks, of Schaeffer's Investment Research, notes that the market has spent the last seven session "dancing around the 10,000 level on the Dow," always within 100 points of that key level. "We have this psychological level that's going to be difficult to overcome," Sparks says. "It's a logical place to pause and catch our breath."

The stock market has come so far so fast that a decline of a couple days is not necessarily significant, Sparks says. "This sideways movement isn't much of a concern for me right now," he says.

An FT.com report said the Fed could water down "extended period" language in its statement to a more neutral "some time" reference in order to maximize its options as it prepares to head to the exits on extremely accommodative policy. The article cites "senior officials" as seeking some sort of transitional language that won't spark fears of an imminent rate hike.

Stocks finished mixed in Europe, with benchmark indexes posting losses of 0.39% in Frankfurt and 0.33% in Paris, while London posted a 0.68% gain. Asian markets advanced, with Tokyo stocks up 0.15%, Hong Kong higher by 1.71%, and Shanghai ahead 1.85%.

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