* News Corp spinoff to replace Apollo Group in S&P 500
* Stocks rebound after Wall Street Journal story
* Oracle slides after results miss
* Dow, S&P up 0.4 pct, Nasdaq down 0.1 pct
By Alison Griswold
NEW YORK, June 21 U.S. stocks rose slightly in a
volatile Friday session after two days of sharp losses, as
investors grappled with the changing outlook for the Federal
Reserve's monetary policy.
Shares have slumped since Wednesday when Federal Reserve
Chairman Ben Bernanke laid out the Fed's plans to pull back on
its $85 billion in monthly asset purchases.
Coming into the day, the S&P 500 had fallen nearly 5 percent
from its all-time closing high of 1,669.16 on May 21 and was on
track for its largest weekly drop this year. The current
pullback is the largest since an 8.9 percent decline between
September and November.
However, stocks rebounded from losses later in the day,
after the Wall Street Journal published an analysis saying the
market may be misreading the Fed's message, and that reduction
in bond buying may not come as soon as some expect.
"The market read what it wanted to read but although there
was a reaction in stocks, yields aren't moving," said Joe
Saluzzi, co-manager of trading at Themis Trading in Chatham, New
"It just shows that the equity market is nervous and would
react to any headline at this point."
While equities have moved into positive territory in the
last hour, the 10-year Treasury yield currently sits at 2.49
percent, only slightly below the day's highs, as investors
continue to reset expectations for Fed policy.
Volatility has spiked since May 22 when Bernanke first
hinted that the Fed may begin to rein in its stimulus measures,
and is expected to continue. The CBOE Volatility Index, a
gauge of anxiety on Wall Street, jumped 23 percent on Thursday
to 20.49, the first time this year it closed above 20. On Friday
it was down 7.6 percent to 18.94.
The Dow Jones industrial average was up 63.66 points,
or 0.43 percent, at 14,821.98. The Standard & Poor's 500 Index
was up 6.32 points, or 0.40 percent, at 1,594.51. The
Nasdaq Composite Index was down 3.73 points, or 0.11
percent, at 3,360.90.
Large bank shares were hit hard as the Treasuries selloff
continued, on fears of bank losses linked to their bond
holdings. Citigroup dropped 4 percent to $45.97 and Morgan
Stanley lost 3.1 percent to $24.37.
"On the very short term basis, the financials have a very
close correlation to the market," said Yu-Dee Chang, chief
trader of ACE Investments in Vienna, Virginia.
"They've run up so much, I think the momentum is to the
downside, the fear of the ending of QE, I think all of that is
creating a weakness in the market for financial stocks."
Oracle Corp dropped 8.2 percent to $30.50, a day
after the tech giant missed expectations for software sales and
subscriptions for a second straight quarter. Oracle was the
biggest drag on both the S&P and Nasdaq
Analysts pointed to the quarterly expiration and settlement
of June equity options and futures contracts on Friday as
another volatility trigger.
About $14 billion is expected to change hands in trading
related to index rebalancing towards the session's close, which
could compound volatility, according to Credit Suisse.
S&P Dow Jones Indices said Thursday that News Corp's
spinoff - also known as News Corp - will
replace Apollo Group in the S&P 500. Apollo shares fell
3.7 percent to $19.00.
China's central bank faced down the country's cash-hungry
banks on Friday, letting interest rates spike as it increased
pressure on banks to curb rampant informal lending and
speculative trading. Some worry that its approach could
backfire, creating the potential for defaults and gridlock in
the money markets of the world's second-largest economy.