Shares drop on Greece uncertainty, rate hike anticipation

NEW YORK (Reuters) - A setback in Greek debt talks pushed U.S. and European shares lower on Friday, along with investor views that positive U.S. data may accelerate the timing for a hike in interest rates.

Traders work on the floor of the New York Stock Exchange June 5, 2015. REUTERS/Brendan McDermid

Oil prices fell on concerns production may rise further.

The International Monetary Fund delegation left Greek debt negotiations on Friday because of “major differences” with Athens on the same day that EU officials held their first formal talks on the possibility of Greece defaulting.

“It’s largely the Greek situation again, and that’s been played out on a day-to-day basis where you had a huge rally followed by a decline predicated on whether they are coming closer or moving further from a resolution,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

However, the darkening Greek outlook failed to fluster Prime Minister Alexis Tsipras, who holed up with his negotiators after proclaiming optimism at an open air concert.

The euro inched higher against the dollar after Tsipras’comments even though equity and bond investors were skeptical.

“You have to question whether (the Greeks are) looking at reality,” said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

U.S. Treasuries prices ended little changed, with longer-dated yields holding below seven-month highs as concerns about a Greek default supported safety demand for bonds ahead of a Federal Reserve policy meeting next week.

A U.S. consumer sentiment survey and production data, after strong retail sales data on Thursday, gave a rosy view of the U.S. economy ahead of the Federal Reserve’s June 17 policy statement, which may provide clues on timing for the first U.S. rate hike in nearly a decade.

“Both of these led the market, coupled with yesterday’s report, to think that the first hike from the Fed could be closer,” said OakBrook’s Sampson, adding that lift-off could be in the fall, ahead of her previous expectation.

The Dow Jones industrial average fell 140.53 points, or 0.78 percent, to 17,898.84, the S&P 500 lost 14.75 points, or 0.7 percent, to 2,094.11 and the Nasdaq Composite dropped 31.41 points, or 0.62 percent, to 5,051.10.

The S&P and the Dow showed slight gains for the week while the Nasdaq fell slightly. [.N]

Oil fell for a second straight day as investors took profits after Saudi Arabia said it was ready to raise production to record highs, adding to worries over global oversupply.

Brent crude settled down $1.24, or 2 percent, at $63.87. For the week, Brent ended up 0.7 percent.

U.S. crude fell 81 cents, or 1.3 percent, to $59.96. It rose 1.5 percent on the week.

In the late afternoon, the dollar index was unchanged after a day of choppy trading against a basket of major currencies while the euro was essentially flat after rising earlier in the day.

MSCI’s all-world country index fell 0.4 percent but was on track for its first weekly gain in four, while the pan-European FTSEurofirst 300 index fell 0.8 percent.

Additional reporting by Caroline Valetkevitch; Editing by Dan Grebler