Stocks fell for a third straight day to post their biggest weekly losses since early July. The reports on durable goods and sales of new homes reminded investors that while the economy might be improving, it might not do so in a straight line.
The Dow Jones industrial average fell 42 points, bringing its three-day loss to 165.
Durable goods orders, a key indicator for the manufacturing industry, fell unexpectedly in August. The Commerce Department said orders for goods expected to last at least three years slid 2.4 percent, after rising 4.8 percent in July. Economists polled by Thomson Reuters had forecast an increase of 0.5 percent.
It was the second drop in three months and the latest sign that any rebound inside the nation's factories is likely to be slow.
Meanwhile, the government also reported that new home sales inched up to 429,000 last month, below analysts' expectations. The tepid improvement followed four months of stronger gains in new home sales that had raised investors' hopes that the troubled housing market was improving.
The market was already starting sour on housing, and had fallen on Thursday following a separate report showing a surprise drop in existing home sales in August. Stocks also fell Wednesday on worries that the Federal Reserve would be too quick to withdraw its financial supports from the economy.
The week's economic reports have hit shares of industrial companies, which have been logging big gains as investors pile into stocks of companies that could see big jumps in profits if the economy improves. The reports ran counter to other data that had boosted hopes for a rebound in manufacturing.
Technology shares fell Friday after quarterly results from BlackBerry maker Research In Motion Ltd. fell short of expectations. That weighed on Nasdaq composite index, which contains a big pool of tech stocks.
The day's losses - and even those for the week - are still modest considering how far stocks have rocketed since major indicators tumbled to 12-year lows on March 9. The Standard & Poor's 500 index, the basis for many mutual funds, is up 54.4 percent since then. Analysts have been calling for a break in the advance so the economy can catch up with investors' expectations.
"We really have come a long way and the markets are taking a pause to reflect the fact that we were up 60 percent," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. "We still think things should stay relatively orderly in the pullback and we're still likely to see further gains."
On Friday, the Dow fell 42.25, or 0.4 percent, to 9,665.19. The index hasn't fallen three straight days since the first week of the month. The broader Standard & Poor's 500 index fell 6.40, or 0.6 percent, to 1,044.38, and the Nasdaq fell 16.69, or 0.8 percent, to 2,090.92.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where consolidated volume came to 4.6 billion shares compared with 5.6 billion Thursday.
For the week, the Dow lost 1.6 percent. It was the biggest slide since the week of July 10 and only the third losing week of the last 11. The S&P 500 index slid 2.2 percent for the week, while the Nasdaq fell 2 percent.
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The week's economic data marked an improvement from a few months ago but still disappointed the market by coming in well shy of analysts' expectations
- a sign that investors might be underestimating how long it will take for the economy to recover. The market will likely need more convincing evidence that the economy is on track before moving higher again.
Next week's heavy calendar of economic reports could help provide more clarity about how the recovery is going. On Friday, the Labor Department will release its monthly employment figures, one of the most closely watched economic reports. Other figures are expected on consumer confidence, manufacturing, factory orders and home prices.
Burt White, chief investment officer at LPL Financial in Boston, contends investors who are parked in safe investments like government bonds and who are upset that they missed the run in stocks should re-examine their portfolio. He said they might consider gradually shifting some money from ultra-safe debt to riskier but higher-returning areas like high-yield bonds. Then they could look to stocks.
In other trading, bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.32 percent from 3.38 percent late Thursday.
The dollar was mixed against other major currencies, while gold prices fell for a third day.
Oil rose 13 cents to settle at $66.02 per barrel on the New York Mercantile Exchange as tension mounted over Iran's nuclear ambitions and Federal Reserve Chairman Ben Bernanke said he still supported a federal lending program that could press the dollar.
The Russell 2000 index of smaller companies fell 2.81, or 0.5 percent, to 598.94.
Overseas, Britain's FTSE 100 rose 0.1 percent, Germany's DAX index fell 0.4 percent, and France's CAC-40 lost 0.5 percent. Japan's Nikkei stock average fell 2.6 percent.
The Dow Jones industrial average closed the week down 155.01, or 1.6 percent, at 9,665.19. The Standard & Poor's 500 index fell 23.92, or 2.2 percent, to 1,044.38. The Nasdaq composite index fell 41.94, or 2.0 percent, to 2,090.92.
The Russell 2000 index, which tracks the performance of small company stocks, fell 18.94, or 3.1 percent, for the week to 598.94.
The Dow Jones U.S. Total Stock Market Index - which measures nearly all U.S.-based companies
- ended at 10,667.69, down 260.82, or 2.4 percent.
Press; By TIM PARADIS]
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