Stocks Fall Amid Weak Data

Stocks slipped Friday after mediocre consumer prices and housing starts data raised questions about the economy's health and prompted investors to rein in their recent stock-buying spree.

The blue-chip Dow Jones industrials (search) fell 31.79 points, or 0.36 percent, to 8,681.35. The tech-laced Nasdaq Composite (search) eased 9.56 points, or 0.62 percent, to 1,541.82, a day after hitting its highest close since June. The broad Standard & Poor's 500 index (search) sagged 2.42 points, or 0.26 percent, to 944.25, a day after ending at its highest level since late August.

Still, the S&P 500 managed to gain 1.2 percent for the week. The Nasdaq Composite also etched out a fifth week of gains with a similar 1.2 percent rise, a feat it last accomplished in November 2001. The Dow climbed for a third week in a row, edging up 0.9 percent for the week.

The S&P 500  has surged 18 percent since mid-March in a rally that carried it to its highest levels in nearly nine months this week and helped it rack up its first five-week winning streak since last summer.

"A lot of this move over the past five or six weeks has been driven by better-than-expected earnings. Now that we have run the course of the earnings period, people are starting to wonder what will be the catalyst to take us out of this trading range to higher levels," said David Memmot, head of listed block trading at Morgan Stanley.

Some investors, fearful of getting left behind if the economy begins to gather speed, are willing to nibble at stocks on any dips. Among those attracting attention was Sun Microsystems (SUNW), which gained 26 cents, or 6 percent, to $4.30.

A sharp drop in energy costs pulled consumer prices down in April, and even without energy costs, prices were flat. The data fanned fears that falling prices might dent corporate profits, after the U.S. producer price index on Thursday showed a record drop last month.

"It's a bigger (CPI) drop than expected. I think this serves to reinforce mounting concerns that we could be seeing some deflation," said Paul Cherney, chief real-time market analyst at S&P Marketscope. "The market's has had a good run since March 11. It would only be natural to see some consolidation of the gains."

A separate report revealed that the once robust housing market cooled during the month. U.S. housing starts fell a surprising 6.8 percent in April on a drop for multifamily home starts, the government said.

Investors largely brushed off a report from the University of Michigan showing that U.S. consumer confidence rose more than expected in early May, traders said.

"The other economic reports today were of bigger concern," said Brett Mitstifer, senior portfolio manager at ValueLine Asset Management, which oversees $4 billion. "The CPI is weaker than expected and is kind of feeding into the deflationary concerns."

Dell Computer Corp. (DELL) pressured the market, dropping 99 cents, or 3 percent, to $31.19, as investors expressed disappointment that its results and outlook did not exceed expectations. Analysts said the company needed to indicate faster growth to justify the recent rise in its stock to 2 1/2-year highs.

Chip equipment makers like Applied Materials (AMAT), down 58 cents at $14.31, sagged after a trade group said on Thursday that orders for semiconductor production and testing equipment from North American manufacturers dropped in April.

The expiration this weekend of stock and stock index options was also making for choppy trading, analysts said.

General Motors (GM) lost 47 cents to $34.41 after Prudential Financial cut the automaker's stock rating to "sell" from "hold," citing the company's declining market share.

AOL Time Warner Inc. (AOL) shareholders on Friday approved the media company's board slate. Its shares rose 26 cents to $14.24.

Drug maker Wyeth (WYE) fell $1.12, or 2.5 percent, to $43.18. The company said far more patients than it expected are threatening to seek damages, alleging they were harmed by its recalled fen-phen diet drugs, increasing uncertainty about the company's financial liability.

The Russell 2000 index, which tracks smaller company stocks, fell 7.33, or 1.7 percent, to 414.72.

Overseas, Japan's Nikkei stock average finished 0.1 percent lower Friday. In Europe, France's CAC-40 lost 0.04 percent, Britain's FTSE 100 gained 0.9 percent and Germany's DAX index slipped 0.01 percent.

Reuters and the Associated Press contributed to this report.