updated 6/22/2009 9:24:22 AM ET 2009-06-22T13:24:22

Caution has once again overcome the stock market.

Major Market Indices

Stocks finished mixed Friday, leaving all the major indexes with their first weekly loss since early May. Tech, financial and retail stocks gained, while utilities and energy stocks were lower.

The market began the day stronger, following surprisingly good reports the day before on jobs and manufacturing. But the early gains gave way to selling in the afternoon, saddling the Dow Jones industrials with four days of losses over the past five.

With little in the way of corporate or economic news Friday, prospects were poor for restarting a rally that powered the market up as much as 40 percent this spring after hitting its lowest level in more than a decade in early March. Traders have grown worried in recent weeks that an economic recovery may be more subdued than originally hoped and that the huge run-up in stocks may have been overdone.

“There’s no question in my mind that the economy is improving,” said Phil Orlando, chief equity market strategist at Federated Investors. “But investors are betting on some sideways consolidation rather than a continuation of a sharp spike in share prices.”

Trading was also jumpy because of the occurrence of a quarterly “quadruple witching,” which marks the simultaneous expiration of four different kinds options and futures contracts.

The Dow Jones industrial average fell 15.87, or 0.2 percent, to 8,539.73, with 16 of the 30 stocks that make up the average posting losses. The broader Standard & Poor’s 500 index rose 2.86, or 0.3 percent, to 921.23 and the Nasdaq composite index gained 19.75, or 1.1 percent, to 1,827.47.

About three stocks rose for every two that fell on the New York Stock Exchange, where consolidated volume came to a heavy 5.47 billion shares, compared with 4.58 billion shares the day before.

All the major indexes closed the week down for the first time since the week of May 11. The Dow lost 3 percent, the S&P 500 index fell 2.6 percent, and the Nasdaq shed 1.7 percent.

Stocks tumbled early in the week as a handful of weak economic reports, including news of a seventh straight monthly drop in industrial production, bucked sharply with the gradual improvement traders had grown used to with other economic readings.

Stocks rebounded modestly on Thursday, spurred by a series of better data on economic activity, including a report that showed the overall number of people drawing unemployment benefits fell last week for the first time since early January.

Traders have been anticipating a pullback after such big gains in such a short period. Usually, a 40 percent move like the one in the S&P 500 index takes years to develop, not months.

“It’s not going to be a one-way ride,” said Keith Walter, portfolio manager of Artio Global Equity Fund.

Analysts are divided over whether the market’s pullback this week has more to go, or if it can now move higher after back-to-back weeks of relatively sideways movement; Last week all the major indexes rose less than 1 percent. Many predict choppy trading well through the summer, when there is typically less volume, and as the market heads into earnings season in July.

Next week will bring reports on existing home sales and durable goods orders, among others. Investors will also be looking to the Federal Reserve for any clues on its monetary policy going forward as the central bank conducts a two-day policy meeting.

Bond prices rose slightly after sliding Thursday ahead of a spate of auctions next week. The yield on the benchmark 10-year Treasury note fell to 3.78 percent from 3.81 percent late Thursday.

Investors have been keeping a close eye on the bonds market recently, concerned that a run-up in Treasury yields will lead to higher borrowing costs and potentially erode some of the economy’s progress. Long-term Treasury yields are closely linked to interest rates on mortgages, which have been rising in recent weeks.

Tech stocks moved higher as Apple Inc.’s latest version of its popular iPhone hit store shelves. Apple shares added $3.60, or 2.7 percent, to $139.48, while rival smart phone maker Palm Inc. jumped more than 6 percent, rising 87 cents to $13.93.

Oil prices reversed early gains and fell $1.82 to settle at $69.55 a barrel in light trading as the contract was set to close Monday.

The dollar fell against the euro and the British pound. Gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.9 percent. Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index rose 0.04 percent, and France’s CAC-40 rose 0.9 percent.

BlackBerry maker Research in Motion Ltd. reported a better-than-expected 33 percent increase in first-quarter earnings, but shipments were below expectations. The stock dropped $3.77, or 4.9 percent, to $72.78.

In other trading, the Russell 2000 index of smaller companies rose 3.24, or 0.6 percent, to 512.72.

For the week
The Dow Jones industrial average closed the week down 259.53, or 3.0 percent, at 8,539.73. The Standard & Poor’s 500 index fell 24.98, or 2.6 percent, to 921.23. The Nasdaq composite index fell 31.33, or 1.7 percent, to 1,827.47.

The Russell 2000 index, which tracks the performance of small company stocks, fell 14.11, or 2.7 percent, for the week to 512.72.

The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 9,428.97, down 272.46, or 2.8 percent, for the week. A year ago, the index was at 13,514.89.

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