Investors held off making big moves in the stock market early Friday following enormous gains earlier in the week, as Wall Street braced for what is expected to be a weak holiday showing from retailers.
With the stock market closing three hours early at 1 p.m. EST, and many traders gone for a long holiday weekend, the session began quietly. Thin trading volume can exacerbate the market's moves, but on Friday morning, stocks traded in a narrow range.
Investors were focused on the prospects for the holiday shopping period, which began in earnest Friday. Wall Street expects retailers will suffer as consumers, nervous about lost jobs, falling home values and a jittery stock market, grow more restrained in their spending this year.
"You've seen all sorts of numbers that point to the fact that discretionary spending in the economy has come to an absolute halt," said David Reilly, director of portfolio strategy at Rydex Investments.
A rare drop in year-over-year holiday spending would be troubling as it is the most important slice of the year for most retailers and because consumer purchases account for more than two-thirds of U.S. economic activity. But while some stores around the nation appeared busy Friday morning as shoppers looked for bargains, the early evidence is anecdotal and Wall Street will have to wait for cash register tallies.
"The discounting appears to be unbelievable," said Reilly. "The retail sector is going to do whatever it can to get people through the door."
Reilly said Wall Street is likely to remain jittery as it tries to estimate how long the economy will remain weak; he is forecasting a recession of more than a year rather than the typical 10 months.
"I think the market is still in the process of adjusting to the fact that we're in a very difficult recession."
In midmorning trading, the Dow Jones industrial average fell 8.52, or 0.10 percent, to 8,718.09.
Broader stock indicators showed more sizable losses. The Standard & Poor's 500 index fell 4.91, or 0.55 percent, to 882.77, while the Nasdaq composite index declined 18.63, or 1.22 percent, to 1,513.47.
The Russell 2000 index of smaller companies fell 4.48, or 0.96 percent, to 464.42.
Because volumes remain low, the indexes' moves Friday won't likely give investors a strong sense of the market's direction. Still, it was a welcome sign that the market did not sell off strongly after the Dow's streak of four straight advances, which gave the index its biggest four-day gain since 1932.
The S&P 500 index also rose for the four consecutive days that ended Thursday, logging its largest four-day rally since 1933.
When trading began Friday, the Dow was up 8.5 percent for the week and the S&P 500 had added 11 percent.
Government bonds were little changed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3 percent from 2.99 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, edged up to 0.04 percent from 0.03 percent Wednesday.
Citigroup Inc. was the biggest gainer in the Dow, rising 77 cents, or 11 percent, to $7.82. Just a week ago, the bank's stock was selling off precipitously, before the government put together a rescue plan for the bank last Sunday.
The dollar mostly rose against other major currencies, while gold prices fell.
Light, sweet crude fell $2.63 to $51.81 per barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 0.23 percent. Stocks in India rose a day after trading was suspended because of the terrorist attacks in Mumbai, the country's financial capital. The Sensex Index ended the day with an advance of 0.7 percent.
Declining issues narrowly outpaced advancers on the New York Stock Exchange, where volume came to a light 240 million shares.
In afternoon trading, Britain's FTSE index rose 0.48 percent, Germany's DAX index fell 0.36 percent, and France's CAC-40 fell 0.27 percent.
___
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
