Wall Street sank Friday, as investors sifted through a series of downbeat economic reports, but drug makers including Johnson & Johnson and Merck & Co. got a boost as Congress neared an agreement on Medicare prescription legislation. The market’s three major stock indexes ended a choppy week with a decline.
The economic reports included a drop in consumer spending, which followed a glum holiday season forecast from Wal-Mart Stores Inc. on Thursday, and an up tick in inflation at the wholesale level during October.
“Advance retail sales weren’t so good,” said Brian Williamson, an equity trader at The Boston Company Asset Management. “Retailers are a little worried about holiday shopping, they’re worried about their profits, so this number confirmed what we saw yesterday.”
The Dow Jones industrial average ended the day down 69.26 points, or 0.7 percent, at 9,768.68, losing 0.4 percent for the week.
The broader gauges also fell. The Nasdaq composite index closed down 37.09 points, or 1.9 percent, at 1,930.26, for a weekly loss of 2.1 percent. And the Standard & Poor’s 500-stock index closed down 8.06 points, or 0.8 percent, at 1,050.35, for a weekly decline of 0.3 percent.
This was the market’s first down week in three. It saw moderate declines four days out of five amid concerns about the economy, but a solid advance on Wednesday during a brief burst of optimism about high-tech sales.
A Commerce Department report Friday showed that Americans cut their spending in October, depressing retail sales for a second month in a row. The news exacerbated investors concerns after Wal-Mart, the world’s largest retailer, said Thursday it was cautious about the outlook for the fourth quarter.
Williamson said investors also were concerned that interest rates could go up faster than expected after a government report suggested inflation was on the rise. The Labor Department said wholesale prices were up 0.8 percent in October, the largest increase in seven months. Economists forecast a rise of just 0.2 percent.
A turnaround in inflation could motivate the Federal Reserve to raise rates.
Also Friday, the Fed reported that industrial production rose by 0.2 percent in October, down from a 0.5 percent gain in September. October’s increase was half the size of the 0.4 percent increase economists expected.
Some positive news came from a survey by the University of Michigan that showed that consumers have become more optimistic about the economy so far this month. The university’s consumer sentiment index increased to 93.5 for the first half of November, according to Dow Jones Newswires. Wall Street had expected a mid-November reading of 91.0.
Although stocks ended the day with declines, investors were not altogether discouraged. The major indexes managed gains for part of the session, and analysts were pleased that the drop wasn’t more severe.
“We’ve had a good run, so seeing the market react this way is very positive,” said Bob Dickey, managing director of technical analysis at RBC Dain Rauscher in Minneapolis. “I think the big thing people are missing here is that earnings have been improving the last six quarters in a row, and that is what’s driving this market. ... The overriding fact is optimism is growing.”
Pharmaceutical stocks saw gains Friday as congressional negotiations on a $400 billion Medicare drug plan appeared close to a conclusion. Johnson & Johnson ended the day up $2.02, or 4 percent, at $52.12. Merck & Co. was up 78 cents at $46.58.
Portal Software Inc. closed down $6.86, of 45 percent, at $8.40, after cutting its forecast for next year, to the disappointment of analysts. J.P. Morgan downgraded the business software maker from neutral to underweight.
Dell Inc. lost 40 cents, closing the day at $35.24 after reporting a 21 percent increase in third-quarter earnings, citing significant growth in key European and Asian markets. The results matched analyst expectations.
Liberty Media Corp. ended the day down 3 cents at $10.00 after reporting an 86 percent rise in third-quarter net income, mostly due to new revenue from QVC Inc.
Decliners outnumbered advancers about 3 to 2 on the New York Stock Exchange. Volume was lighter.
The Russell 2000 index, which tracks smaller company stocks, closed down 8.24 points, or 1.5 percent, at 532.96.
Overseas, Japan’s Nikkei stock average finished 1.1 percent higher Thursday. In Europe, France’s CAC-40 was up 1.1 percent, Britain’s FTSE 100 was up 0.6 percent and Germany’s DAX index was up 0.8 percent.