MARKET REPORT

Dow, S&P 500 recover after skid

After a two-day plunge, two major stock indexes ended the week with an advance Friday.

The Dow Jones industrial average rose 41.08 points, or 0.3 percent, to close at 14,799.40. The Standard & Poor’s 500 index rose 4.24 points, or 0.3 percent, to close at 1,592.43.

“Saner heads are prevailing,” said Jim Dunigan, chief investment officer at PNC Wealth Management. “People are looking a little deeper into the message from the Fed - the economy is getting better,” he said.

Investors had known that sooner or later, the Fed would quit pumping $85 billion per month into the U.S. economy.

That money has been a big driver behind the stock market’s bull run the past four years, leading to low interest rates that encouraged borrowing for such things as factory machinery, commercial airplanes and home renovations. However, unemployment is still high and U.S. growth has been anemic. But investors were confident enough in a growing economy that the Standard & Poor’s 500 index hit an all-time high close of 1,669.16 on May 21.

Then on Wednesday, the Fed said it would aim to turn off that spigot by the middle of next year as long as the economy is strong enough.

The Dow dropped 560 points on Wednesday and Thursday on the news.

Friday’s gains were led by the kinds of stocks that investors favor when they want to play it safe: Makers of consumer staples, utilities, and health-care companies rose the most of the 10 industries in the S&P 500 index. Theonly two categories that fell were technology stocks and companies that make basic materials.

The gain wasn’t enough to erase the market’s recent losses. The S&P 500 fell 2.1percent for the week, and the Dow was down 1.8 percent. Stocks have now fallen two weeks in a row and four of the past five.

The real question will be whether the selloff continues next week, said Frank Fantozzi, chief executive of Planned Financial Services. The market’s swoon this week appears to be more of an adjustment than the beginning of a long-term rout. “If the flow out of equities starts to increase, this might be the pullback we’ve been waiting for,” he said.

Many investors have been predicting some kind of pullback in the market after its nearly unbroken advance since fall. The S&P 500 index rose for seven straight months through May. So farin June it’s down 2.1 percent.

The yield on the 10-year Treasury note hit 2.54 percent, up from 2.42 percent late Thursday. It has risen sharply since Wednesday as investors sold bonds in anticipation that the Fed would slow, and eventually end, its bond purchases, if the U.S. recovery continues.

The yield, which is a benchmark for interest rates on many kinds of loans including home mortgages, was as low as 1.63 percent as recently as May 3.

The Nasdaq composite index, which is heavily weighted with technology stocks, fell 7.39 points, or 0.2 percent, to 3,357.25. Apple, the biggest stock in the index, fell $3.34, or 0.8 percent, to $413.50. Microsoft fell 23 cents, or 0.7 percent, to $33.27.

The price of gold recovered after plunging Thursday. Gold rose $5.80, or 0.5 percent, to $1,292 an ounce. Crude oil fell $1.45, or 1.5 percent, to $93.69 a barrel in New York.

The dollar rose against other currencies as traders anticipated that U.S. interest rates would rise as the Fed winds down its bond purchases.

Business, Pages 28 on 06/22/2013

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