NEW YORK (REUTERS) - United States (US) stocks fell on Friday as investors puzzled over the Federal Reserve's decision to maintain its stimulus measures as they heard opposing viewpoints from top Fed officials.
Despite lower closes in the past two sessions, the major stock indexes ended higher for the week. The Dow rose 0.6 per cent, the S&P gained 1.3 per cent and the Nasdaq advanced 1.4 per cent.
On Wednesday, the Fed surprised economists and investors with its decision to delay scaling back its stimulus.
St Louis Federal Reserve Bank President James Bullard, interviewed by Bloomberg TV, said a reduction of the Fed's US$85 billion (S$106 billion) monthly bond purchase programme beginning in October was possible. Mr Bullard later said in a speech in New York that low inflation meant the Fed can be patient in deciding when to scale back its pace of asset purchases.
But Kansas City Federal Reserve Bank president Esther George sharply criticised her colleagues' decision this week not to reduce the Fed's bond-buying programme, warning it sowed confusion and risked the US central bank's credibility, given markets conviction that the policy would be adjusted.
"The fact of the matter is they (the Fed) basically had a'freebie', The markets had already adjusted for all this. They (the Fed) would be able to take the first step in doing some tapering," said Mr Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco.
"The market will view this as a bad move on their part, and we are already seeing that today. It is also a reflection on what the Fed didn't do and some disappointment with that."
Two companies made their stock market debuts with initial public offerings (IPO) and achieved stellar results.
New stock offerings by cybersecurity company FireEye Inc and advertisement technology company Rocket Fuel Inc managed to debut with spectacular results.
FireEye shares opened 101.5 per cent above the IPO at US$40.30 and closed up 80 per cent to US$36. Rocket Fuel also more than doubled in its trading debut, and ended he session up 93.4 per cent to US$56.10.
The Dow Jones industrial average fell 185.46 points or 1.19 per cent, to 15,451.09, the S&P 500 lost 12.42 points or 0.72 per cent, to 1,709.92 and the Nasdaq Composite dropped 14.656 points or 0.39 per cent, to 3,774.728.
Trading volume was heavier than usual as Friday marked the event known as "quadruple witching", when stock index futures, stock index options, stock options and single stock futures all expire on the same day. Trading increases as investors replace or repurchase existing contracts.
In addition to the quadruple witching, all three major US stock indexes, as well as the FTSE and US index trackers, rebalanced their portfolios to match revisions to index weights.
This happened at the close of trading, and helped push trading volume higher as transactions jump at the exact close.
About 8.43 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, was well above the daily average volume of 6.25 billion.
Caterpillar Inc was one of the biggest drags on the Dow, down 3.4 per cent to US$84.75 after the maker of heavy machinery reported sales for the three-month rolling period ending in August.
US-listed shares of BlackBerry Ltd plunged 17.1 per cent to US$8.73 after the struggling smartphone maker unveiled a restructuring plan that includes cutting 4,500 jobs. The company said it expects second-quarter results to miss Wall Street's expectations by a wide margin.
Even with the declines over the past two sessions, each of the major indexes managed to advance for a third straight week, aided by a rally on Wednesday that took both the Dow and S&P 500 indexes to record highs after the Fed's decision.
Declining stocks outnumbered advancing ones on the NYSE by 2,172 to 836, while on the Nasdaq, decliners beat advancers 1,364 to 1,191.