Investors can't shake their fears that the economy isn't keeping up with the stock market.
Stocks fell for a third straight day Friday as a disappointing outlook from computer maker Dell Inc. suggested that an economic recovery could be uneven. The major indexes all had moderate losses, leaving the Dow Jones industrials with a slim 0.5 percent weekly gain while broader indexes slid.
The market, which has been shuttling between concerns about the economy and traders' need to find high-yielding investments, is back to worrying about the economy. Demand for safe haven investments like Treasurys and the dollar rose for a second day in response to Dell's outlook and comments from European Central Bank President Jean-Claude Trichet, who said the ECB plans to start reining in some of its stimulus programs. A rising dollar also hit commodities producers and exporters.
The week's trading saw investors, who have been pumping money into stocks because record-low interest rates mean paltry returns for the dollar and Treasurys, change that strategy. Many are now questioning whether the massive stock rally this year really has been justified given the soft spots in the economy, and so they've been quick to retreat to safe harbors like government debt and the greenback.
The yield on the three-month T-bill, which moves opposite its price, fell to 0.01 percent from 0.02 percent late Thursday. Yields briefly turned negative Thursday as investors seeking to pad their portfolios with safe investments before the end of the year were willing to accept negative returns.
"Investors seem to need a constant reassurance with where we are in the economic recovery," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego. "We just haven't gotten it in the past few days."
Instead, investors got the type of downcast news from Dell that suggests a recovery could be uneven. The company said sales of its computers to big businesses remain sluggish. Its quarterly revenue and profit missed analysts' expectations.
The Dow slipped 14.28, or 0.1 percent, to 10,318.16. The Dow fell 119 points, or 1.1 percent, in the final three days of the week. It ended the week up 0.5 percent because of steep gains Monday following an improvement in retail sales.
The broader Standard & Poor's 500 index fell 3.52, or 0.3 percent, to 1,091.38, while the Nasdaq composite index, dominated by tech stocks like Dell, fell 10.78, or 0.5 percent, to 2,146.04.
For the week, the S&P 500 index fell 0.2 percent and the Nasdaq lost 1 percent. For November, those indexes are each up about 5 percent, while the Dow is up about 6 percent.
The ICE Futures US dollar index, which measures the dollar against other major currencies, rose 0.4 percent. The stronger dollar can hurt commodities prices and sales of U.S. exporters, whose goods become more expensive overseas when the dollar rises.
Demand for longer-term Treasurys fell, pushing yields higher. The yield on the benchmark 10-year note rose to 3.37 percent from 3.34 percent.
Many of the week's economic numbers made investors cautious. Reports Wednesday and Thursday showing a drop in housing starts and a jump in mortgage delinquencies upended an advance that had been all but unbroken in November. Those figures brought worries that an economic recovery will be slow and bumpy.
Concerns about the pace of a recovery have dogged the market's eight-month rally but with the nation's unemployment rate now above 10 percent for the first time in 26 years and new worries about housing, some analysts say investors have raced too far ahead of a recovery in the economy.
Many investors have amassed big gains in the climb since March that has left the S&P 500 index up 20.8 percent so far this year. Analysts say volume has fallen in November because some money managers are stepping away from the market to safeguard their gains.
Traders predict volume will be light again next week because of Thanksgiving. Even with the holiday, the week brings a flurry of reports on home sales, unemployment, consumer confidence and demand for big-ticket manufactured goods.
The government also will revise its early estimate that said the economy grew at an annual pace of 3.5 percent during the July-September quarter. Many analysts now expect gross domestic product will be revised lower because of recent reports on housing and retail sales.
Hank Smith, chief investment officer of equity at Haverford Investments in Radnor, Pa., said investors are worried that a lower reading on GDP will mean the economy didn't start the final quarter of 2009 with as much strength as had been hoped.
Smith said the market's slump after its peak Tuesday wasn't unexpected because of the steep gains of the first half of the month. He predicts the latest slide and others won't be deep because some investors who didn't take part in the market's eight-month rally are looking for opportunities to jump in.
"The investors who have missed this move are experiencing tremendous anxiety about missing a new bull market but also about getting paid nothing or, in some cases, negative returns," Smith said.
Dell fell $1.58, or 10 percent, to $14.29.
Energy companies logged some of the biggest drops as crude oil fell 74 cents to settle at $76.72 per barrel on the New York Mercantile Exchange as the dollar rose. Gold rose.
Three stocks fell for every two that rose on the New York Stock Exchange, where consolidated volume came to 3.8 billion shares compared with 4.3 billion shares Thursday.
The Russell 2000 index of smaller companies fell 1.00, or 0.2 percent, to 584.68.
Overseas, Britain's FTSE 100 fell 0.3 percent, Germany's DAX index lost 0.7 percent, and France's CAC-40 dropped 0.8 percent. Japan's Nikkei stock average fell 0.5 percent.
The Dow Jones industrial average closed the week up 47.69, or 0.5 percent, at 10,318.16. The Standard & Poor's 500 index fell 2.10, or 0.2 percent, to 1,091.38. The Nasdaq composite index fell 21.84, or 1 percent, to 2,146.04.
The Russell 2000 index, which tracks the performance of small company stocks, fell 1.60, or 0.3 percent, for the week to 584.68.
The Dow Jones U.S. Total Stock Market Index _ which measures nearly all U.S.-based companies _ ended at 11,064.78, down 30.37, or 0.3 percent.