Wall Street pulls back after a three-week advance that sent the major gauges up more than 20%.
By Alexandra Twin, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- Stocks retreated Friday morning as investors took a step back after propelling equities over 20% in under three weeks.
The Dow Jones industrial average (INDU) fell 130 points, or 1.7%, around an hour into the session. The S&P 500 (SPX) index lost 13 points, or 1.6%. The Nasdaq composite (COMP) lost 28 points, or 1.7%.
Stocks rallied Thursday, extending the nearly three-week old rally that has lifted the major stock gauges off multi-year lows. But Wall Street pled exhaustion Friday morning.
Financial and technology shares, which led the advance on Thursday, led the retreat on Friday. But declines were broad based and 27 out of 30 Dow stocks fell.
President Obama is meeting Friday with executives from the nation's largest banks to discuss the financial crisis and government efforts to provide relief. Expected are CEOs from a dozen or so companies including JPMorgan Chase (JPM, Fortune 500) and Citigroup (C, Fortune 500).
Rapid rally: Since falling to more than 12-year lows on March 9, the Dow had gained 21% and the S&P 500 had gained 23% as of Thursday's close. Also on March 9, the Nasdaq touched a more than six-year low. Since then, it has gained 25%.
But year-to-date, only the Nasdaq has closed in positive territory, while the Dow and S&P 500 remain below early-February levels.
Better-than-forecast economic reports on housing and durable goods orders this week have added to hopes that the economy is closer to stabilizing. Investors have also responded well to the latest plans from the government to stabilize the financial system.
On Thursday, Treasury Secretary Tim Geithner outlined a huge overhaul of the regulatory system. On Monday, he detailed plans to purge bank balance sheets of up to $1 trillion in bad debt that is limiting lending.
Economic news: Personal income fell 0.2% in February after rising 0.2% in January. Economists surveyed by Briefing.com thought it would fall 0.1%. Personal spending rose 0.2% in February after rising 1% in January. Economists thought it would rise 0.2%.
Company news: Google (GOOG, Fortune 500) said late Thursday that it was cutting just under 200 sales and marketing positions worldwide. It is the second round of layoffs in Google history.
General Motors (GM, Fortune 500) shares rallied on published reports that the government could extend the automaker's restructuring deadline, giving it more time to gain concessions from unions and qualify for more taxpayer help.
The Wall Street Journal said that the government could extend the March 31 deadline by 30 days. On Thursday, GM said that 12% of its U.S. workforce has taken its latest buyout offer. However, the company is still looking to work with the union to alter retiree health care benefits, among other things.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.72% from 2.73% Thursday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian markets mostly ended higher and European markets tumbled in afternoon trading.
In currency trading, the dollar gained against the euro and fell against the yen.
U.S. light crude oil for May delivery fell $2.44 to $51.90 a barrel on the New York Mercantile Exchange.
COMEX gold for May delivery fell $14.90 to $926 an ounce.
Americans spending more
By Ben Rooney, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Consumer spending rose in February, rebounding for the second month in row after falling for six straight months, according to government figures released Friday.
The Commerce Department said spending by individuals rose 0.2%, after increasing a revised 1.0% in January. February's results were in line with a forecast from Economists surveyed by Briefing.com.
After adjusting for inflation, however, real personal spending declined 0.2%. In January, it rose 0.7%.
"It appears the majority of the declines in consumption for this cycle are behind us," Adam York, an economist at Wachovia Economics Group, wrote in a client note.
February's spending uptick came as the Commerce Department reported personal income fell 0.2%. Income rose 0.4% in January, but last month's decline marks a return to the recent downward trend as unemployment has risen.
The report also showed that personal savings declined $27.4 billion in February to $450.7 billion. The personal savings rate, expressed as a percentage of disposable personal income, fell to 4.2% from 4.4% in January.
"The personal saving rate remains near recent highs, as consumers attempt to rebuild their damaged balance sheets," said York. "However, weaker income growth is offsetting slower spending."
Consumer spending makes up nearly two thirds of the nation's gross domestic product, which is the broadest measure of economic activity.
The government said Thursday that GDP fell at an annual rate of 6.3% during the final three months of 2008, with spending by consumers falling at an annual rate of 4.3%.
If the consumer spending figures reported Friday carry over into March's report, GDP could see a 1.2% annualized gain during the first three months of 2009, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics.
However, the outlook for consumer spending and second quarter GDP is less optimistic.
"We look for a renewed decline in the second quarter on the back of falling incomes and the lagged effect of the massive destruction of housing and other wealth," Shepherdson wrote in a research note. "The first quarter is a correction, not a recovery."
