Stocks ended a turbulent second quarter with a moderate decline Friday as money managers, doing some last-minute adjustments, locked in gains from Thursday’s big rally.
Analysts attributed the sell-off to end-of-quarter “window dressing” by managers preparing quarterly reports and the annual reconstitution of the Russell 3000 index, in which some stocks were added to the index while others were dropped.
“This was nothing attributed to market conditions,” said Ryan Larson, senior equity trader at Voyageur Asset Management.
The Dow Jones industrial average closed down 40.58, or 0.36, to 11,150.22. On Thursday, the Dow surged 217.24, its biggest single-day jump since March 21, 2003, when it added 235.37.
Broader stock indicators also fell. The Standard & Poor’s 500 index dropped 2.67, or 0.21 percent, to 1,270.20, after Thursday’s gain of 26.87, its largest point gain since March 17, 2003.
The Nasdaq composite index fell 2.29, or 0.11 percent, to 2,172.09 after rising 62.54, its largest point gain since July 27, 2002.
Markets rallied Thursday after the Federal Reserve raised rates by a quarter of a percent and seemingly moderated its interest rate policy statement. But the Fed has still promised to keep a close eye on economic data.
“You still have a ’show-me’ type market,” said Bryan Piskorowski, market analyst at Wachovia Securities. “We’re not out of the woods yet. Clearly, we’re living number to number from here on out.”
The day’s economic data was, on balance, positive for stocks. The government said inflation, as measured by a price gauge tied to consumer spending, rose by 0.4 percent in May and was up 0.2 percent when energy and food prices are excluded. This measure of core inflation is up 2.1 percent when compared to May 2005, slightly above the Fed’s upper bounds for core inflation of 2 percent.
The University of Michigan’s June consumer sentiment reading came in better than expected, but the government reported consumer spending slowed sharply in May as rising gasoline prices left Americans with less to spend on other items. The Commerce Department said spending rose by just 0.4 percent last month after a 0.7 percent gain in April. Income growth also slowed to an advance of just 0.4 percent last month, reflecting weaker job growth.
Bonds rose, with the yield on the 10-year Treasury at 5.14 percent, down from 5.20 percent Thursday. The U.S. dollar was mixed against other major currencies. Gold prices were higher.
Crude oil futures rose. A barrel of light crude settled at $73.93, up 41 cents, in trading on the New York Mercantile Exchange.
Friday marked the end of a difficult quarter for stocks. While on May 10 the Dow Jones industrials were just 75 points away from their all-time high close of 11,722.98, last reached in January, 2000, Wall Street abruptly reversed direction the next day, beginning weeks of losses as investors grew more anxious about the direction of interest rates. It wasn’t until this week that stocks regained their footing.
In company news, General Motors Corp. rose $2.35, or 8.6 percent, to $29.79 after automakers Renault SA and Nissan Motor Co. said they are interested in purchasing a significant stake in GM, according to a letter sent by major holder Tracinda Corp., billionaire investor Kirk Kerkorian’s investment company. General Motors said it had not received an offer.
Apple Computer Inc. fell $1.70, or 2.9 percent, to $57.27 after the company said late Thursday that an internal investigation discovered irregularities related to the issuance of certain stock-option grants made between 1997 and 2001, including one — later canceled — to CEO Steve Jobs.
MasterCard Inc. closed unchanged at $48 after falling in earlier trading after the European Commission charged the company with fixing the fees retailers must pay for accepting MasterCard and Maestro branded cards, saying this limits competition between banks who use the service.
Travel and real-estate conglomerate Cendant Corp. rose 52 cents to $16.29 after the company said it is selling its travel services unit that includes Orbitz.com to an affiliate of private-equity firm Blackstone Group for $4.3 billion in cash, the companies announced Thursday.
Consolidated volume was 4.7 billion shares, up from 2.85 billion shares on Thursday, as investors adjusted their holdings at the end of the quarter.
The Russell 2000 index of smaller companies rose by 10.21 points, or 1.43 percent, to 724.53.
Overseas, Japan’s Nikkei stock average rose 2.54 percent. Britain’s FTSE 100 rose 0.72 percent, Germany’s DAX index rose 1.82 percent, and France’s CAC-40 gained 1.75 percent.