Stocks slid on Friday as the Federal Reserve's plan to rekindle consumer and small business lending fell short of expectations and General Electric was hit by analysts' bearish comments.
Financial shares fell for a second day, giving up some of their recent sharp gains after investors applied for less than 2.5 percent of the $200 billion the Fed pledged to lend through a program considered key to reviving ailing banks. For details, see [nN19460872]
The expectations for TALF were not met by any measure, said Michael Pento, senior market strategist at Delta Global Advisors, in Holmdel, New Jersey, referring to the Fed's Term Asset-Backed Securities Loan Facility.
Chevron was among the Dow's biggest drags, dropping 3.6 percent as oil prices fell , while American Express fell 6.2 percent after a broker warned of more losses and predicted the credit card company's dividend would be cut.
Even so, the S&P 500 finished its best two-week run since 1974 as markets extended last week's bounce off of 12-year lows. For the year, however, the broad index remains down 15 percent.
The Dow Jones industrial average slipped 122.42 points, or 1.65 percent, to 7,278.38. The Standard & Poor's 500 Index shed 15.50 points, or 1.98 percent, to 768.54. The Nasdaq Composite Index lost 26.21 points, or 1.77 percent, to 1,457.27.
Friday marked the quarterly expiration and settlement of four different March equity futures and options contracts -- a convergence known as quadruple witching, which made trading volatile.
For the week, the Dow added 0.75 percent and scored its first two-week consecutive gain since early May. The S&P 500 rose 1.58 percent for the week, and the Nasdaq gained 1.80 percent.
Banking shares were among the most heavily traded stocks, including Bank of America, which fell 10.7 percent to $6.19 and the S&P financial index dropped 5.3 percent.
American Express Co shares tumbled 6.2 percent to $12.26 after analysts at Friedman, Billings, Ramsey said the company may post a loss in 2009 and 2010, hurt by growing unemployment levels and rising credit card defaults. They also said American Express may slash its dividend.
GE shares were also heavily traded, falling 5.8 percent to $9.54 after analysts lowered their 2009 profit forecasts for the economic bellwether and Dow component.
One of the few bright spots of the day was Johnson & Johnson, up 3.2 percent at $51.67 after an anticoagulant drug from J&J and Bayer AG was backed by a U.S. advisory panel on Thursday, despite concerns over possible side effects.
Trading was heavy on the New York Stock Exchange, with about 2.47 billion shares changing hands, well above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.46 billion shares traded, above last year's daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, about nine stocks fell for every four that rose.