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Stocks retreat along with energy sector

By Kate Gibson, MarketWatch –

NEW YORK — U.S. stocks edged lower Friday, cementing the Dow Jones industrial average’s third weekly loss this year. Energy firms fell the most among the S&P 500 index’s 10 major sectors as oil slid below $107 a barrel.

The day’s modest loss, amid anemic volume, came after a week of milestones that pushed the benchmarks up to multi-year highs.

“Markets don’t move in a straight line, and obviously there’s a risk of a pullback here,” said David Kelly, chief market strategist at JPMorgan Funds.

Off 0.04 percent from the week-ago close, the Dow average fell 2.73 points, or 0.02 percent, to 12,977.57.

The S&P 500 shed 4.46 points, or 0.3 percent, to 1,369.63. Energy firms were hardest-hit among the index’s 10 subsectors, a day after President Barack Obama called on Congress to end $4 billion in subsidies for oil and gasoline companies.

The S&P 500 rose 0.3 percent for the week.

The Nasdaq composite declined 12.78 points, or 0.4 percent, to 2,976.19, a level that has it 0.4 percent up from last Friday’s close.

Friday’s retreat follows a week when stocks touched some notable landmarks that highlighted how much equities had recovered over the past few months.

This week, the Dow average closed above 13,000 for the first time since 2008, and the Nasdaq composite crossed 3,000 for the first since late 2000. The S&P 500 ended February with its best two-month start to the year since 1987.

Strong oil prices were an increasing distraction.

After briefly rising above $110 a barrel in electronic trading late Thursday, crude-oil futures on Friday shed $2.14, or 2 percent, to settle at $106.70 a barrel on the New York Mercantile Exchange after Saudi Arabia denied a report on Iran’s state-run television of a pipeline explosion. Oil fell 2.8 percent for the week, its first weekly drop in four.

The price of crude has climbed this year on worries that a standoff between Western countries and Iran over Tehran’s nuclear program might spark conflict in the Persian Gulf region.

Israeli Prime Minister Benjamin Netanyahu is expected in Washington on Monday to talk about the issue.

“Israel cares much more about Iran having a bomb than the price of oil, while the West and East have an overwhelming interest in keeping the flow of oil going,” said Kelly at JPMorgan Funds.

The dollar rose against other global currencies including the euro and the yen.

Equities’ near-steady rise has many analysts, including Kelly, saying a pullback, even short-term, was likely in store.

But investors should be cautious in banking on a market retreat, given any drops could be likened to “small waves in a rising tide,” Kelly said.

From his perspective, the overall economic and market climate is only getting better, as evidenced by recent data that had U.S. auto sales in February rising to their highest level since before the recession, and same-store sales up at the 18 retail chains that reported February figures.

“The main stories are in place. The U.S. economy is clearly improving here, with 15 million units in vehicle sales and strong chain-store sales,” said Kelly.

“Consumer spending is coming back, and what that says is, consumer confidence is coming back. That also affects hiring, business and investor behavior,” he added.

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