Stocks closed with moderate losses Friday, pushed lower by the price of oil and the banking sector upset by a plunge in Deutsche Bank after the giant German bank said it wouldn’t settle with the Department of Justice over mortgage-backed securities in the 2008 financial crisis.
Investors also were on edge regarding the possibility of the Federal Reserve raising interest rates at a meeting of policymakers next week.
ON WALL STREET: At the close, the Dow Jones industrial average was down 88.7 points, about 0.5 percent, at nearly 18,123.8. The Standard & Poor’s 500 index gave up 8.1 points, about 0.4 percent, to 2,139.2, and the Nasdaq composite lost 5.1 points, about 0.1 percent, to 5,244.6.
OIL PRICES: As markets closed, the price of benchmark U.S. crude was down 71 cents at $43.81 a barrel in trading on the New York Mercantile Exchange. In London, the price of Brent crude, used to price international oils, fell 58 cents to $46.01 per barrel.
DEUTSCHE BANK: The U.S.-listed shares of Deutsche Bank dropped $1.42, or 10 percent, to $13.34 after the bank said it did not intend to pay the $14 billion settlement that the U.S. government asked for. Federal regulators have been looking to settle with Deutsche Bank, as it has done with the other major Wall Street firms like Goldman Sachs and JPMorgan Chase & Co., for its role in the mortgage bubble and financial crisis. Other European banks fell as well. Royal Bank of Scotland Group fell 32 cents, or 6 percent, to $4.84.
FED WATCH: Stocks have been volatile this week, with the Dow moving more than 100 points four out of five days. Most of the volatility has come as investors prepare for next week’s meeting of the Federal Reserve Open Market Committee. While most investors do not expect the policymakers to enact a rate increase, there is a small but noticeable likelihood there will be one.
“By the Fed’s own criteria, everything is in place for them to raise rates. But still, people don’t think they are going to raise rates, so the market is in conflict,” said analyst David Kelly, chief global investment strategist at JP Morgan Asset Management.
S&P 500 ADDS A SECTOR: The S&P 500 is adding a new industry to its traditional groups for the first time since the dot-com era. The benchmark stock index will now have a real estate sector, which will be split off from the financial services component of the S&P 500. The new industry component will be effective at the end of trading Friday. After the split, the S&P 500 will have 11 industry sectors. The 10 current sectors of the S&P 500 are: financial services, information technology, energy, industrials, consumer discretionary companies, materials, telecommunications, consumer staples, health care and utilities.
INFLATION DATA: U.S. consumer prices edged up 0.2 percent in August as a surge in medical care offset flat readings for food and energy. The 0.3 percent increase was the biggest monthly increase since February. The climb in core inflation was led by a record jump in drug prices and the biggest rise in doctor and hospital charges in a quarter-century.