U.S. stocks finished slightly lower on Friday as China took another step towards monetary policy tightening and Europe reported a weaker than expected Gross Domestic Product (GDP).
The energy and basic materials sectors were among the biggest decliners and European financial stocks continued to struggle. Chinese and European firms traded in the U.S. also underperformed the broad market.
The S&P 500 Index closed down 2.96 points, or 0.27 percent, at 1,075.51. The Dow Jones Industrial Average closed down 45.05 points, or 0.44 percent, at 10,099.14.
The tech heavy Nasdaq Composite managed to close at a gain. It rose 6.12 points, or 0.28 percent, to end at 2,183.53.
The technology sector was one of the few to close higher. It was led by Intel (NASDAQ:INTC), up 1.84 percent, Qualcomm (NASDAQ:QCOM), up 2.18 percent, and Research in Motion (NASDAQ:RIMM), up 3.12 percent.
European banks continued to struggle. Investors are still concerned about the lack of clarity regarding the European Union's bailout plans for Greece. The weak euro zone GDP report also weighed on the market.
For the euro zone, fourth quarter GDP grew only 0.1 percent and for 2009, it shrank 4.0 percent. Notably, the economy of Spain and Italy contracted for the fourth quarter and Germany showed no growth.
The American Depositary Receipts (ADRs) of Banco Santander (NYSE:STD), a financial firm headquartered in Spain, closed down 2.08 percent. ADRs of Barclays (NYSE:BCS) fell 2.40 percent. Deutsche Bank AG (USA) (NYSE:DB) closed down 1.99 percent.
ADRs of National Bank of Greece (NYSE:NBG) showed unusual activity. Starting around 2:15 pm, it gained 7 percent in 20 minutes on heavy trading volume. It then pared some gains and closed at a loss of 0.50 percent for the day.
China officials announced today that they will raise the bank reserve requirement by 0.50 percent to 16.50 percent; many experts expect China to continue tightening.
Energy stocks, especially from foreign companies, were among the steepest decliners. The ADRs of PetroChina (NYSE:PTR) dropped 2.08 percent and those of CNOOC (NYSE:CEO), a firm incorporated in Hong Kong, fell 3.22 percent.
China-related ADRs generally struggled; China Mobile (NYSE:CHL) was down 1.20 percent, China Petroleum & Chemical (NYSE:SNP) fell 1.96 percent, and China Telecom (NYSE:CHA) slipped 1.77 percent.
China has been withdrawing liquidity for the past few weeks by raising bank reserve ratios and restricting bank lending. Experts generally expect the tightening to continue; some even expect more drastic methods in the near future.
T3Live's Chief Strategic Officer Scott Redler sees China's move as the prudent thing to do.
China's asset prices have moved ahead of economic recovery and they need to do something to maintain stability, said Redler.
Brandon Rowley, an equity trader from the same firm, cautions that this is likely not the last round of tightening we will see out of the country.
Andy Xie, the former chief Asian economist of Morgan Stanley, told Bloomberg in a phone interview that he expects China to raise interest rates by the end of March.
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