US stocks end downbeat week with moderate losses

Wall Street finished its worst week of the year with a moderate decline today as persistent unease over inflation and interest rates kept investors nervous about buying.

Stocks had appeared to steady themselves in morning trading Friday following several days of heavy losses. But a jump in import prices and increased demand for foreign-made products renewed the market’s inflation jitters and sent stocks sliding by midday.

Since the Federal Reserve said in early May that more rate hikes could be needed to counter inflation, investors have been increasingly unwilling to place bets and bid stocks higher. The Dow Jones industrial average shed more than 355 points this week and is off 6.5% from a six-year high of 11,642.98, reached May 10.

Analysts say Wall Street’s pullback has been exacerbated by traders repositioning their holdings to account for the risk of rising interest rates and slowing economic growth. But while stocks have slumped, investors were still unsure where to put their money.

“I think we still have to push the risky asset values lower relative to safe assets because there’s been so much speculation that needs to be unwound,” said Jack Ablin, chief investment officer of Harris Private Bank, who added that the afternoon retreat was an ominous sign of more losses in the coming sessions.

The Dow slid 46.90, or 0.43%, to 10,891.92, after having been up 37 points earlier in the session.

Broader stock indicators also declined. The Standard & Poor’s 500 index fell 5.63, or 0.45%, to 1,252.30, while the Nasdaq composite index lost 10.26, or 0.48%, to 2,135.06.

Despite the major indexes’ retreat, advancing issues were just ahead of decliners on the New York Stock Exchange. NYSE volume of 1.6 billion shares trailed the 2.56 billion shares that changed hands Thursday.

The major indexes finished a nervous week with steep losses, saddled by concerns that rising interest rates would slow demand and hinder the global economy. For the week, the Dow dropped 3.16%, the S&P 500 sank 2.79 percent and the Nasdaq plunged 3.8%.

Bonds prices drifted, with the yield on the 10-year Treasury note slipping to 4.98% from 5% late Thursday. Short-term yields continued lingering above long-term rates, signaling greater expectations of slowing economic growth.

Elsewhere, the US dollar dipped against the Japanese yen and was flat versus European currencies, while gold prices stood near 610 an ounce. Crude futures gained amid political unrest in Iraq following the death of the country’s main terrorist leader, with a barrel of light crude up 1.28 to settle at 71.63 on the New York Mercantile Exchange.

While the Fed has been fixated on accelerating inflation, recent signs of economic weakness has investors fretting that the Fed might lift rates too high and derail the economy, said Jack Caffrey, equities strategist for JPMorgan Private Bank.

Next week’s reports on wholesale and consumer prices will provide the latest clues on the economy’s health and could spark more investor debate on the battle between economic growth and inflation.

“People will be thinking about what the Fed will be debating at their June 28-29 meeting,” Caffrey said. ”Investors are scared not necessarily about what the Fed will say, but of the possibility that the Fed may overtighten rates.”

The Commerce Department on Friday said the nation’s trade gap widened by 1.5 billion to 63.4 billion – below estimates of 65 billion – amid higher oil prices and a flood of furniture, computers and toys from China.

Meanwhile, the Labor Department said prices for imported goods grew 1.6% in May, or just 0.6% without petroleum. Export prices excluding agriculture rose 0.6%, the department added.

In corporate news, Texas Instruments Inc. raised its earnings and revenue targets for the second quarter, but attributed the gains to a legal settlement and a tax break. Texas Instruments nonetheless dropped 1.04 to 29.68.

Dow Jones industrial Coca-Cola Co. added 16 cents to 43.55 after Bear Stearns upgraded the beverage maker to ”outperform” on gains from a weak dollar and improved results in some of its major foreign markets.

The Dow got further support from Prudential Equity’s upgrade of Alcoa Inc. to “neutral,” citing an attractive stock price following a monthlong pullback. Alcoa gained 11 cents to 30.18.

The Russell 2000 index of smaller companies fell 5.14, or 0.73%, to 701.39.