A setback in talks between Greece and its creditors helped knock the stock market lower on Friday, amid renewed concerns that the country could default on its debts. Despite the drop, the Standard & Poor's (S&P) 500 index managed to eke out a 1-point gain for the week, snapping a two-week slump.
An unexpected decision by the International Monetary Fund (IMF) to walk away from talks with Greece spurred the selling. At a summit meeting in Brussels late on Thursday, the IMF pulled its negotiators out of talks with Greece, saying there had been no progress and that major differences remained on key issues.
Without a deal by the end of the month, Greece faces the prospect of going bankrupt and dropping the euro currency. Markets are likely to make sudden turns until Greece and its creditors reach a deal, said Ninh Chung, head of investment strategy at SVB Asset Management. Earlier this week, stocks on both sides of the Atlantic rallied on reports of progress in the talks. “There had been optimism over Greece," Chung said, “and now it seems like we've had a complete 180.”
The S&P 500 slipped 14.75 points, or 0.7 per cent, to close at 2,094.11. The Dow Jones industrial average fell 140.53 points, or 0.8 per cent, to 17,898.84, and the Nasdaq composite lost 31.41 points, or 0.6 per cent, to 5,051.10. The losses were modest but broad: All 30 companies in the Dow and all 10 industries in the S&P 500 finished with losses.
Speculation over Greece's fate and the Federal Reserve's first interest rate increase have weighed on markets over recent weeks. Many think an improving US economy will push the Fed to raise its benchmark interest rate later this year for the first time since the Great Recession.