Wall Street ended its weekly trade with sharp losses as fears of a second-dip recession struck traders' hearts after negative data suggested a bleak outlook for the world's biggest economy.
Friday's trade locked four days of straight losses fueled by the Federal Reserve's decision on Tuesday to revive crisis-era stimulus spending to prop up the ailing US economy, whose recovery, it warned, was slowing down.
In what was the worst trading weeks in six weeks, the Dow Jones Industrial Average lost 3.29 percent to 10,303.15 point, while the technology-rich Nasdaq composite index shed 5.02 percent to 2,173.48 points.
The broader S&P 500 index dropped 3.78 percent to 1.079.25 points.
The Federal Open Market Committee (FOMC) said Tuesday that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated."
The Fed also said it would maintain its historically low interest rates between zero to 0.25 percent. But FOMC member Thomas Hoenig warned on Friday that current interest rates levels were "a dangerous gamble."
The bank had battled the worst recession in a generation by buying up US debt, mortgage-backed securities and other financial products to lubricate markets.
The grim outlook was deepened by reports showing an unexpected rise in weekly jobless claims, and that the US trade gap had widened sharply in June to the highest level in 20 months.
Figures suggesting a slowdown in the Chinese economy further compounded fears about the pace of the global recovery from the worst recession in decades.
Positive earnings reports from entertainment giant Walt Disney and department store chains Macy's and Kohl's failed to improve gloomy sentiments on Wall Street.
Cisco System's share took a heavy beating, pulling the Nasdaq down, as it lost more than 11 percent over the past week alone, after the Internet communications giant reported a disappointing profit and issued a cautious forecast.
"Early in the week the market was hit by a one-two punch of a gloomier than expected FOMC report as well as weaker than expected data from China," said Sam Stovall, an analyst at Standard and Poor's.
"In general, people are worried that the macro economic data is now overtaking the euphoria that we had gotten from second quarter earnings," he said.
Next week is likely to continue the low-volume trade with the monthly producer price index and industrial production reports set to show a timid improvement from the previous month, said Stovall.
Eyes will also be focused on the housing market with the release of the housing market index on Monday, and the housing starts reports Tuesday, as investors seek to feel the market pulse.
"We're basically scratching our heads... but I would tend to say that economic reports next week will probably be more encouraging than the other way around," he said.
Furthermore, several companies will release their quarterly results, including the world's largest retailer Walmart and PC manufacturer Dell, which seeks to recover from a volatile week in the technology market affected by low forecast in the global computer market.
Copyright 2010  AFP Global Edition
