Stocks Lose Ground for Second Straight Week

For the second straight week, stocks lost ground, as the Dow Jones industrial average closed down 1.2 percent after several days of rocky trading.

The blue-chip Dow is down 4.1 percent over the past two weeks. Of the major indexes, only the Nasdaq composite index closed up for the week, rising 0.6 percent.

Yesterday, stocks languished, closing nearly flat, as investors locked in profits and remained cautious about the economic recovery.

After surging 2 percent Thursday, the Dow yesterday closed down 0.4 percent, or 34.01 points, at 8438.39. The broader Standard & Poor's 500-stock index was also flat, losing 0.1 percent, or 1.36 points, to close at 918.90.

The Nasdaq managed to cling to positive territory with the help of some technology stocks, including smartphone maker Palm, which climbed 15.7 percent, to $16.22 a share, despite reporting a quarterly loss. The Nasdaq gained 0.5 percent, or 8.68 points, to close at 1838.22.

Investors have pushed stocks up more than 30 percent since March on glimmers of hope that the deterioration of the economy is slowing. But in recent weeks traders have become concerned about the pace of the recovery.

The major indexes will likely continue to trade within a small band, recording slight gains and losses, until there are more concrete signs of an economic recovery, perhaps in the fall, analysts said. "We have enjoyed a powerful rally since March. I think we have some digesting to do. Stocks don't go straight up," said Philip J. Orlando, chief equity market strategist at Federated Investors in New York.

Wall Street struggled yesterday despite a 1.5 percent decline in oil prices, which fell to $69.16 a barrel on the New York Mercantile Exchange. Analysts have become concerned that rising oil prices could put pressure on consumer spending. And investors shrugged off government data showing that personal spending increased 0.3 percent in May and that personal income leapt 1.4 percent.

Though income is rising, it appears that consumers are saving their cash instead of spending it. The savings rate rose to 6.9 percent, a 15-year high. "The increase in the savings rate gave some traders second thoughts," said Joseph Brusuelas, a director of Moody's Economy.com. "We need them to spend more of their savings, but they are not ready to jump in the game yet."

The focus next week will be on more economic data, including the monthly unemployment report. Analysts expect unemployment to rise from its 9.4 percent May level, with many forecasting that it will hit 10 percent by the end of the year.

Investors will look for evidence that while employers continue to shed jobs, they are doing it at a slower rate, analysts said. "We think it's going to be more of the same, which is to say, less bad," Orlando said.