NEW YORK – Stocks fell Friday as news that consumer sentiment deteriorated unexpectedly in June prompted investors to lock in profits after three days of gains.
The Dow Jones industrial average (search) fell 79.43 points, or 0.86 percent, to 9,117.12 Friday. The broader Standard & Poor's 500 Index (search) dropped 9.90 points, or 0.99 percent, to 988.61. The technology-laced Nasdaq Composite Index (search) was down 27.13 points, or 1.64 percent, at 1,626.49.
For the week, the Dow gained 0.60 percent, the S&P 500 edged up 0.09 percent and the Nasdaq dipped 0.06 percent.
"The market's risen dramatically, and there's going to be some profit-taking. Investors are looking at negative news when it does come out as a chance to take some profits," said Rick Meckler, president of investment firm Liberty View Capital Management, which oversees more than $1 billion.
Although economists had forecast a gain in the University of Michigan index of consumer sentiment (search), it fell to 87.2 in June from May's 92.1. More worrisome, the reading on consumers' outlook on the economy's future slumped to 84.2 in June from 91.4 in May, suggesting Americans find it hard to sustain the optimism that followed the end of the Iraq war.
Consumer confidence is viewed as a precursor to consumer spending, which drives two-thirds of the U.S. economy.
"This shows that the consumer could be weakening, and since the consumer is the only part of the economy that's been spending, it raises concern," said Paul Cherney, chief market analyst at S&P Marketscope.
"My view of this is it's healthy profit-taking and consolidation," said Gary Wedbush, head of trading at Wedbush Morgan. "Markets don't go straight up. There's always something out there to assign a pullback to and the main one would be consumer confidence coming in lighter than expected."
Weighing on Nasdaq, Adobe Systems (ADBE) fell 12 percent, a day after the software maker forecast third-quarter results would be down from the second quarter. Shares sank $4.43 to $31.55. It was among Nasdaq's most actives.
Cree Inc. (CREE) also weighed on Nasdaq after it said Eric Hunter, a founder of the semiconductor maker, filed a $3 billion suit against the company and chairman Neal Hunter, his brother, charging they broke securities laws and threatened his family. Cree dropped 18.5 percent, or $4.11, to $18.10.
Intel Corp. (INTC) slid after Deutsche Securities cut its rating on the stock to "hold" from "buy," citing a lack of further near-term factors to drive its stock price higher and large recent gains racked up by semiconductor stocks. Intel fell 3.5 percent, or 78.1 cents, to $21.359.
Among Nasdaq's most active names was the world's No. 2 software maker, Oracle Corp.(ORCL), which had better-than-expected earnings and offered a positive outlook. Oracle, locked in a hostile takeover bid for rival PeopleSoft Inc. (PSFT), rose 1.1 percent, or 15 cents, to $13.48.
Guidant (GDT) fell 61 cents to $39.95 in heavy trading after a subsidiary of the medical devices maker pleaded guilty to 10 felonies, including shipping misbranded products and lying to government regulators.
Honeywell (HON) lost 5 cents to $27.86 even though the aerospace company reported $1.3 billion of new orders for jet parts and services.
Shares of telecom equipment maker Lucent Technologies Inc. (LU) were among the Big Board's big movers after The Wall Street Journal reported that U.S. securities regulators have informed two former executives they may be subject to civil action related to aggressive sales tactics used three years ago. Lucent's stock fell 3.6 percent, or 8 cents, to $2.14.
Earlier, the government said U.S. wholesale prices (search) fell in May as the end of the war in Iraq caused energy prices to tumble. Still, the drop was mild enough to soothe worries about widespread price declines.
The Labor Department's Producer Price Index (search), which measures prices paid to farms, factories and refineries, fell 0.3 percent in May. Excluding food and energy, the so-called core PPI crept up 0.1 percent. Economists had pegged a 0.2 percent decline in the overall index.
Some analysts said the PPI figures fueled hopes of an interest rate cut when the Federal Reserve's policy-making committee meets later this month.
"These numbers confirm deflationary pressures, which the Fed is adamant on fighting. It lends credibility to the fact that the Fed will most likely lower rates by at least a quarter point, which should be supportive to the equity markets," said John Person, head financial analyst with Infinity Brokerage Services in Chicago.
Volume was active, with about 1.26 billion shares changing hands on the New York Stock Exchange and about 1.82 billion traded on Nasdaq. Decliners outnumbered advancers by about 2 to 1 in both markets.
The Russell 2000 index, which tracks smaller company stocks, fell 7.03, or 1.5 percent, to 449.71.
Overseas, Japan's Nikkei stock average finished up 0.7 percent. In Europe, France's CAC-40 dropped 1.4 percent, Britain's FTSE 100 fell 0.7 percent and Germany's DAX index lost 1.6 percent.
Reuters and the Associated Press contributed to this report.