US stocks fall slightly after lacklustre week

US stocks ended a lacklustre week with a moderate decline today as higher oil prices weighed on investors’ already rickety sentiment and Treasuries rallied amid concerns about a meltdown in the subprime mortgage market.

It was the worst week for the Dow Jones industrials since mid-August. The broader market indexes were mixed for the week.

The pullback followed several mixed sessions in which the tech-dominated Nasdaq composite index showed slight gains but blue chip stocks pulled back in part amid inflation concerns. Oil settled at its highest level of the year today, eclipsing a high for the year set yesterday.

Bond prices rose today, rebounding from a sell-off a day earlier, as investors sought quality amid concerns that subprime lenders would be forced to book big write-downs for consumers who were unable to keep up with payments. The yield on the benchmark 10-year Treasury note fell to 4.68% from 4.73% late yesterday.

“The defaults that you’re seeing in the subprime market are a bit of a wake-up call for investors. I think you’re going to see a continued flight to safety,” said James Sonneborn, wealth manager at RegentAtlantic Capital LLC.

The Dow Jones industrial average fell 38.54, or 0.30%, to 12,647.48.

Broader stock indicators also fell. The Standard & Poor’s 500 index fell 5.19, or 0.36%, to 1,451.19, and the Nasdaq slipped 9.84, or 0.39%, to 2,515.10.

For the week, the Dow industrials lost 0.94%, the S&P 500 was off 0.35% and the Nasdaq composite index added 0.75%.

The dollar was mixed against other major currencies today, while gold prices rose.

Light, sweet crude settled up 19 cents at 61.14 dollars on the New York Mercantile Exchange.

Investors looking for direction in the final session of a holiday-shortened week ultimately showed little reaction to comments from Federal Reserve officials.

Dallas Fed president Richard Fisher said weakness in housing might be keeping inflation in check and that inflation might be showing signs of easing. His comments appeared in line with those made by Fed chairman Ben Bernanke last week.

In addition, San Francisco Fed president Janet Yellen reiterated her contention that the Fed should remain vigilant about inflation and raise interest rates if necessary. Neither Mr Fisher nor Ms Yellen have a vote on the Federal Open Market Committee, which sets short-term interest rates.

The remarks follow a reading on consumer prices earlier in the week which showed inflation was higher than expected. And a pronounced increase in oil prices could also increase costs for businesses and consumers.

“Any time we get a little bit of irritation thrown into the system the market is going to pull back,” said Robert Brown, chief investment officer at Genworth Financial Asset Management, referring in part to the rise in oil prices.

“The stock market is very emotional at this point. It reacts to the tiniest bit of news and turns around and reverse the direction on it.”

The speeches came as inflation concerns infiltrated Wall Street’s sentiment to a greater degree than in recent weeks.

Only last week, stocks showed their best performance of the year after Mr Bernanke testified before congressional committees that inflation was likely to moderate over two years. The movement this week was a counterpoint to last week’s run-up.

“The market is latching onto the Fed speeches because there is nothing else to latch onto. It’s groping for meaning, it’s groping for data,” Mr Brown said.

“You’ve got a base of a market having ignored risk. The market has discounted risk to such an extreme. It has been driven by excessive liquidity and fantastic corporate profit growth, which is unsustainable.”

The moves in the bond market follow word that some borrowers with shaky credit were struggling to pay their loans.

Earlier in the week, NovaStar Financial Inc. warned it expects little if any taxable income in the next five years. The subprime lender, whose stock has fallen sharply this week, fell 86 cents, or 9.2%, to 8.48 dollars.

Delta Financial, another subprime lender, fell 48 cents, or 4.7%, to 9.75 dollars.

In other corporate news, Microsoft fell 49 cents to 28.90 dollars after a San Diego jury said the software maker would have to pay 1.52 billion dollars to Alcatel-Lucent SA in a patent-infringement case.

Lowe’s Cos, the nation’s second-largest home improvement chain behind Home Depot Inc, rose 1.30 dollars, or 3.9%, to 34.93 dollars after the company posted better-than-expected fiscal fourth-quarter results. Home Depot was off 22 cents at 40.96 dollars.

Rising oil prices lent a modest boost to energy stocks. Exxon Mobil Corp rose 14 cents to 75.22 dollars, while ConocoPhillips advanced 32 cents to 67.20 dollars.

Taco Bell parent Yum Brands Inc fell 55 cents to 60.51 dollars after news video footage showed rats scurrying about a New York City Taco Bell.

Tekelec, a maker of telecommunications signalling devices, fell 1.39 dollars, or 9.3%, to 13.51 dollars after the company’s 2007 forecast was met with disappointment on Wall Street.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.45 billion shares.

The Russell 2000 index of smaller companies fell 2.80, or 0.34%, to 826.64.

Overseas, Japan’s Nikkei stock average rose 0.44%. Britain’s FTSE 100 closed up 0.32%, Germany’s DAX index rose 0.27%, and France’s CAC-40 was up 0.15%.