Some analysts think that a rate increase by the Fed in September could be greeted positively by the market.
“If the Fed does it for the right reasons—that the economy is on solid footing—then, markets would welcome a rate increase,” said Joe Saluzzi, partner at Themis Trading.
Other market participants suggested that investors are losing confidence in the effectiveness of monetary policy.
On Thursday, the European Central Bank held its interest rates pat and opted not to expand its quantitative-easing measures, which disappointed Wall Street.
“With the ECB’s inaction sparking fears that central banks have lost confidence in the benefits of further monetary easing, Wall Street could find itself vulnerable to steeper losses,” said FXTM Research analyst Lukman Otunuga in a note.
Other central-bank talk: Fed Gov. Daniel Tarullo, who’s viewed as dovish on monetary policy, said he couldn't rule out a rate increase this year, but would like to see more inflation, during an interview on CNBC.
Fed officials will gather on Sept. 20-21 to set interest rate policy, and the quiet period before that meeting begins Tuesday.
Corporate docket: Home builder Hovnanian Enterprises Inc . /zigman2/quotes/203952761/composite HOV -1.57% shares closed down nearly 13% after disappointing results and a lowered outlook.
Restoration Hardware Holdings Inc. /zigman2/quotes/200286355/composite RH -0.81% shares advanced 3.1% after the home-furnishings retailer posted better-than-expected quarterly sales and per-share earnings late Thursday.
Finisar Corp. shares jumped 13% as networking company late Thursday posted earnings that surpassed expectations.
A review deadline for the proposed merger between Dow Chemical Co. /zigman2/quotes/203121064/composite DOW -0.89% and DuPont Co. /zigman2/quotes/203606582/composite DD -1.07% by the European Union’s antitrust regulator has been suspended. The regulator said the companies haven’t submitted important information demanded of them. Shares of both companies fell nearly 2%.
Logistics company CAI International Inc. /zigman2/quotes/206798451/composite CAI -0.31% shares fell 5.2% as the company expects its exposure to the bankruptcy of South Korean shipping company Hanjin Shipping Co. Ltd will be about $2.6 million.
Other markets: Asian stocks dropped, with South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.42% falling 1.3% as investors took in North Korea’s nuclear test. Gold futures settled down 0.5% at $1,334.50 an ounce, as the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.0031% climbed 0.4%.
North Korea Nuclear Test Is Its Biggest Yet, Seoul Says
North Korea confirmed it had conducted a nuclear test—its fifth since 2006—after South Korea's seismic monitoring agency detected an earthquake that was more powerful than those linked to the North's earlier tests. Photo: AP
<STRONG>—Carla Mozee in London contributed to this article.</STRONG>