The Nasdaq rose on Friday, on strong demand for Palm's Inc's
The technology-heavy Nasdaq outperformed, helped partly by gains in Palm after it posted a narrower-than-expected loss late on Thursday and said demand was strong for its new Pre smartphone. Palm shares jumped nearly 16 percent to $16.22.
Weighing on sentiment, a jump in the savings rate suggested that the debt-burdened U.S. consumer may not drive the economy out of recession as fast as hoped.
Data showed that while consumer spending and income both rose in May as the government stimulus spread through the economy, much of the money was being stored away. Savings jumped to a record annual level of $768.8 billion, the highest level since record keeping began in 1959.
Robert Stimpson, portfolio manager at Oak Associates in Akron, Ohio, said that while he did not put too much store on the savings data alone, the trend in the United States was toward more saving and less spending.
The U.S. markets are probably going to lag the rest of the world because we have a need to pay down debt, increase our savings rate and be better stewards of our own capital, which might lead to lower consumer spending versus the rest of the world, Stimpson said.
There was a strong surge in trade late in the session, pushing volume significantly above last year's daily average, as Russell Investments announced the final reconstitution of the widely followed Russell 3000 index<.RUA>.
But the session was relatively quiet for most of the day after a busy week that included Federal Reserve Chairman Ben Bernanke's contentious appearance on Capitol Hill and the sale of a record $104 billion in U.S. Treasury debt.
The Dow Jones industrial average <.DJI> dropped 34.01 points, or 0.40 percent, to 8,438.39. The Standard & Poor's 500 Index <.SPX> fell 1.36 points, or 0.15 percent, to 918.90. But the Nasdaq Composite Index <.IXIC> gained 8.68 points, or 0.47 percent, to 1,838.22.
The Chicago Board Options Exchange Volatility Index<.VIX> or VIX, Wall Street's most popular indicator of investor anxiety, closed at 25.93, its lowest level since September 12, the Friday before Lehman Brothers went into bankruptcy.
For the week, stocks finished mixed. The Dow slid 1.19 percent and the S&P 500 fell 0.25 percent, while the Nasdaq rose 0.59 percent.
The S&P 500 has climbed as much as 40 percent since hitting a 12-year closing low in early March. But the rally has stalled in recent weeks as investors look for more signs of an economic recovery. Some analysts are expecting a significant pullback in stock prices over the summer.
Today is a real mixed market without any significant trends, said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut. Generally there is a lack of conviction about what the next direction for the market will be.
Oil settled below $70 per barrel, hitting energy bellwethers Chevron Corp
Analysts noted stocks were buffeted by profit taking after Thursday's 2 percent gain, as well as by end-of-quarter window dressing. This can add volatility as portfolio managers sell stocks with big losses and buy some of the quarter's best-performing issues to help improve their returns.
Trading volume was heavy on the New York Stock Exchange, with about 2.35 billion shares changing hands, far above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 4.31 billion shares traded, sharply above last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,833 to 1,170 while on the Nasdaq, there were 1,714 advancers and just 937 decliners.
(Editing by Jan Paschal)