The Dow industrials edged lower to cap their biggest weekly retreat of the year, as big trading losses at J.P. Morgan Chase weighed on sentiment.
The Dow Jones Industrial Average fell 34.44 points, or 0.3%, to 12820.60, erasing earlier gains after reports of a Securities and Exchange Commission review tied to J.P. Morgan's trading loss. The blue-chip index fell 1.7% on the week, its worst weekly performance since mid-December.
The Standard & Poor's 500-stock index retreated 4.6 points, or 0.3%, to 1353.39. The Nasdaq Composite rose 0.18 point, or less than 0.1%, to 2933.82.
"We had a great first quarter and were up almost 30% from the lows in October, and now we're seeing a bit of a consolidation," said Jim Dunigan, managing executive of investments at PNC Wealth Management. "I don't know that we'll have a significant decline, but we may just drag along here."
Financial shares led the S&P 500 lower as J.P. Morgan Chase fell $3.78, or 9.3%, to $36.96, its biggest percentage slide since August. The drop accounted for 83% of the Dow's decline.
The blue-chip bank said late Thursday that it had taken $2 billion in trading losses in the past six weeks, stemming from bad derivatives bets. The company said it could face an additional $1 billion in losses in the second quarter as a result of market volatility.
The news shaved $14.4 billion from J.P. Morgan's market value, as nearly 2.2 million shares in the bank changed hands, the most in a single day since at least 1984, according to FactSet Research Systems.
Telecom shares advanced. Verizon Communications and AT&T rose, as Credit Suisse analysts recommended buying the shares, saying they will benefit from "growing discipline around pricing and subsidies in the wireless industry."
Consumer sentiment improved in early May, according to a Thomson Reuters/University of Michigan index, bucking economists' expectations for a decline. The Producer Price Index was down 0.2% in April, while economists surveyed by Dow Jones Newswires were expecting a decline of 0.1%. The core PPI, which excludes food and energy, matched expectations with a rise of 0.2%.
In Europe, the Stoxx Europe 600 added 0.3%, as the consumer-sentiment data and resilience in U.S. markets led a late rebound. Benchmark indexes in France and the U.K. fell for the second consecutive week, while the German DAX gained 1% on Friday and rose for the week.
In Greece, Antonis Samaras, leader of the conservative New Democracy party, said he was able to find common ground with Democratic Left party leader Fotis Kouvelis, providing some hope that a coalition government will be formed.
Also, the European Union said that while risks remain, it sees initial signs of an economic recovery in Europe next year.
Asian markets fell, weighed down by J.P. Morgan Chase's news and some disappointing data out of China. Japan's Nikkei Stock Average and China's Shanghai Composite each shed 0.6%. Industrial output growth in China slowed in April to the lowest level since May 2009.
Crude-oil prices lost 1%, to settle at $96.13, while gold prices declined 0.7%, to finish at $1,583.60 a troy ounce. The dollar rose against the yen but fell versus the euro.
In corporate news, Nordstrom slumped 2.57, or 4.8%, to 50.96, after the high-end department-store chain reported fiscal first-quarter earnings that missed analyst expectations, but it affirmed its full-year outlook.
Arena Pharmaceuticals rallied 2.70, or 74%, to 6.36 after a Food and Drug Administration panel recommended the approval of Arena's lorcaserin to treat obesity.
Nvidia jumped 79 cents, or 6.4%, to 13.21 after the graphics-chip maker reported fiscal first-quarter results that were well above expectations and provided a second-quarter revenue outlook that was above projections.
Ignite Restaurant Group, which operates the Joe's Crab Shack and Brick House Tavern+Tap chains, rose 3.13, or 22%, to 17.13 on its first day of trading. The company's initial public offering priced at $14, the high end of its expected range.
-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; firstname.lastname@example.org