Stocks finished broadly lower Friday, as Federal Reserve officials' warnings on inflation and a chipmaker's sales warning weighed on the market. Analyst upgrades boosted the auto sector.
On Friday, the Dow Jones industrial average fell 56.8 points, or 0.45%, to 12,580.83. The broader Standard & Poor's 500 index dropped 10.25 points, or 0.71%, to 1,438.06. The tech-heavy Nasdaq composite slid 28.85 points, or 1.16%, to 2,459.82.
NYSE breadth was decidedly negative, with 23 issues declining for every 10 advancing. Nasdaq breadth was 20-10 negative.
In economic news, a quiet calendar was highlighted by remarks from Fed officials indicating more interest-rate hikes could be in the cards. St. Louis Fed President William Poole predicted inflation will fall into a reasonable range this year, but said core inflation above 2% would be unacceptable.
Cleveland Fed President Sandra Pianalto said inflation statistics were improving, but further policy firming may be needed. Dallas Fed President Richard Fisher said he's "fairly comfortable" with the inflation outlook. Meanwhile, Fed Governor Susan Bies announced her retirement.
Next week's calendar holds reports on retail sales, industrial product, and housing starts, along with Fed Chairman Ben Bernanke's testimony on the economic outlook.
Among Friday's stocks in the news, Micron (MU) weighed on the tech sector after the semiconductor maker said it was seeing softness in some of its flash memory chip sales.
MasterCard (MA) was sharply lower after the credit card maker warned operating margin growth may slow this year, although its fourth-quarter profit still topped Wall Street expectations.
Alcatel-Lucent (ALU) was lower as the telecom equipment maker said it plans to cut another 3,000 jobs after it swung to a fourth-quarter loss.
On the upside, Broadcom (BRCM) was higher after the semiconductor maker reported a 76% plunge in fourth-quarter earnings on higher sales than analysts projected. The company said it may buy back up to $1 billion in shares.
Companies due to report earnings next week include Coca-Cola (KO), Whole Foods (WFMI), and Yum! Brands (YUM).
Outside of earnings, Bank of America (BAC) was lower after the banking giant entered a "leniency agreement" with the Justice Department relating to an investigation into municipal derivatives. Separately, the company agreed to a $14.7 million settlement with the IRS.
General Motors (GM) and Ford (F) were higher after Deutsche Bank upgraded the automakers from hold to buy amid expectations of a possible agreement this year with the United Auto Workers union about health-care obligations.
U.S. Steel (X) was lower following a downgrade by Bank of America from buy to neutral.
Fortress Investment Group (FIG) was up in its first day of trading.
On the M&A front, auto parts maker Lear (LEA) reportedly accepted a $2.31 cash buyout offer from top shareholder and billionaire investor activist Carl Icahn.
Elsewhere, U.S. Airways (LCC) was lower amid news CEO Doug Parker was arrested on a drunken driving charge.
In the energy markets Friday, March West Texas Intermediate crude oil futures rose 18 cents to $59.89 a barrel in choppy trading following Thursday's late surge.
European markets finished higher. The FTSE-100 index in London rose 36.4 points, or 0.57%, to 6,382.8. Germany's DAX index added 34.38 points, or 0.5%, to 6,911.11. In Paris, the CAC 40 index was up 27.35 points, or 0.48%, to 5,692.45.
Asian markets ended mixed. In Japan, the Nikkei 225 index gained 211.85 points, or 1.23%, to 17,504.33. In Hong Kong, the Hang Seng index lost 57.39 points, or 0.28%, to 20,677.66. Korea's Kospi index added 4.1 points, or 0.29%, to 1,427.68.
Treasury yields climbed after rising during the week amid strong demand for the Treasury Department's three quarterly refunding auctions. The 10-year note fell in price to 98-25/32 for a yield of 4.78%, while the 30-year bond dropped to 98-07/32 for a yield of 4.86%. Profit-taking caused a defensive tone to take hold, says Action Economics.