NEW YORK Gold prices and stocks on major markets gave back some gains on Friday after soaring this week in the wake of the Federal Reserve's unexpected decision to maintain its monetary stimulus.
The Fed's move had spurred benchmark U.S. stock indexes to all-time highs on Wednesday, as well as driving up the price of gold and depressing bond yields, but doubts remain about the direction of U.S. monetary policy.
St. Louis Federal Reserve Bank President James Bullard said in an interview on Bloomberg TV on Friday that a start to winding down the stimulus program was possible in October, depending on upcoming economic data.
Gold prices fell 2.8 percent on Friday, erasing the week's gains, while U.S. crude futures were also sharply weaker. Currencies were little changed.
The Dow Jones industrial average .DJI ended down 185.46 points, or 1.19 percent, at 15,451.09. The Standard & Poor's 500 Index .SPX closed down 12.43 points, or 0.72 percent, at 1,709.91. The Nasdaq Composite Index .IXIC finished down 14.66 points, or 0.39 percent, at 3,774.73. The S&P rose 1.3 percent on the week.
"We're cautioning our clients to keep their powder dry. While markets aren't historically overbought and the Fed has removed some uncertainty, we wouldn't be surprised if we saw some kind of correction going into October," said Mark Martiak, senior wealth strategist at Premier Wealth/First Allied Securities in New York.
In an encouraging sign for investors, cybersecurity company FireEye Inc (FEYE.O) shares surged in their trading debut, ending 80 percent higher at $36.
European shares .FTEU3 dipped 0.3 percent while the euro was holding near an eight-month high after its best week since July. Investors also looked ahead to German elections on Sunday.
MSCI's index of world shares .MIWD00000PUS fell 0.6 percent but still notched a third straight week of 2 percent-plus gains. Japanese stocks .N225 slipped 0.2 percent.
U.S. DOLLAR, BONDS HOLD GROUND
The U.S. dollar index .DXY rose 0.1 percent, holding above its lows of the week after finding some support on Thursday from economic data.
Analysts at BNP Paribas said they expected the greenback to "recover quickly versus the lower-yielding currencies in the G10." Fadi Zaher, head of bonds and currencies at Kleinwort Benson, said they were also betting on dollar gains.
Emerging market currencies and stocks were some of the biggest winners from the Fed move this week after taking a battering in May and June on prospects of reduced U.S. monetary stimulus.
Indian financial markets were roiled again on Friday, however, after the Reserve Bank of India unexpectedly raised interest rates by 25 basis points.
The Indian rupee fell 0.7 percent to 62.23 to the U.S. dollar while Indian shares .BSESN fell almost 2.0 percent.
The benchmark 10-year U.S. Treasury note was up 5/32, with the yield at 2.7337 percent. Benchmark 10-year German government bonds were also stable at 1.895 percent after yields sank to a one-month low of 1.812 percent on Thursday.
The euro and the euro zone shares and higher-yielding bonds have been supported by recent signs of economic recovery, but some market players are getting nervous before Sunday's German election.
Though Chancellor Angela Merkel is likely to win a third term, her lead has narrowed in recent polls. A new eurosceptic party, Alternative for Germany, could make headway in parliament, which might rattle some investors.
"If the party gets 5 to 6 percent of the vote, people will start gauging the risk of Germany leaving the euro. That would be negative for the euro zone," said Arihiro Nagata, head of foreign bond trading at Sumitomo Mitsui Banking Corp.
Brent crude oil rose 0.5 percent to $108.91 per barrel, having dropped steeply the previous session on increased Libyan production and signs of a thawing of diplomatic relations between Iran and the West.
U.S. crude fell 1.6 percent on Friday as expiration of the contract for October delivery prompted liquidation selling, traders said.
(Editing by Andrew Hay, Clive McKeef and James Dalgleish)