March 01, 2013 at 10:04 AM EST
Stocks drop as budget cuts loom
Stocks opened lower on Wall Street Friday, with the Dow pulling back from close to a record, as automatic government spending cuts are about to kick in. The Dow Jones industrial average fell 35 points, or 0.3%, to 14,019 points as of 10 a.m. The index came within 15 points of its record close of 14,164 Thursday afternoon, before momentum petered out in late trading, leaving the index lower for the day. The Standard & Poor's 500 index was down six points, or 0.4%, at 1,509. The Nasdaq composite fell 17 points, or 0.5%, to 3,142. Stocks have surged in recent weeks even in the face of $85 billion automatic across-the-board spending cuts that start kicking in Friday in the absence of a deal to avert them. The cuts are part of a 10-year, $1.5 trillion deficit reduction plan that was designed to be so unpalatable to both Democrats and Republican that they would be forced to compromise and reach a compromise on the budget. President Barack Obama has summoned the top congressional leadership to the White House Friday, for a meeting designed to give all sides a chance to stake out their fiscal positions, though there are no expectations of a breakthrough. U.S. consumers increased spending modestly in January but cut back on major purchases, the Commerce Department said Friday. The report suggests higher tax rates that kicked in on Jan. 1 may have made consumers more cautious. Consumer spending rose 0.2% in January compared with December. The gain was driven by an increase in spending on services, partly reflecting higher heating bills. Spending on durable goods, such as cars and appliances, fell 0.8%. Spending on non-durable goods, such as clothing, was essentially flat. The government also reported that American incomes plunged in January at the fastest pace in two decades. American incomes fell 3.6% in January, the biggest drop since January 1993. That followed a solid 2.6% rise in December. The Dow and the S&P 500 have surged this year on optimism that the housing market is recovering and the employers are slowly starting to hire more. Strong company earnings have also helped boost stocks. The Dow is up 6.9% this year and the S&P 500 index is 5.8% higher. Best Buy Co. rose 80 cents to $17.18 after the retailer said that its fourth-quarter loss narrowed as better sales in the U.S. helped offset weakness abroad, particularly China and Canada. The yield on the 10-year Treasury note, which moves inversely to its price, fell two basis points to 1.86%.
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