DJI-NEW YORK, Sept 28 (Reuters) - Wall Street closed its best third quarter since 2010 after a wave of central bank actions sparked a dramatic reversal in equity markets, but signs of weakness in the economy drove stocks lower on Friday.
The S&P 500 climbed 5.9 percent over the past three months as central banks geared up to boost liquidity to markets and kick-start their flagging economies. The move has lifted the benchmark index as much as 17 percent this year, recently pushing the S&P to its best level in five years.
But on Friday, investors grappled with more disappointing U.S. economic data as business activity in the U.S. Midwest contracted for the first time since 2009. The news came on the heels of other weak regional manufacturing reports and a sharp drop in U.S. durable goods orders last month. Full Story]
"The reality is that the fundamentals of the market certainly don't support a 17-plus-percent run-up year to date, but with all the QE (quantitative easing) action, that has had a huge, huge impact," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.
The Dow Jones industrial average .DJI fell 48.84 points, or 0.36 percent, to close at 13,437.13. The Standard & Poor's 500 Index .SPX lost 6.48 points, or 0.45 percent, to finish at 1,440.67. The Nasdaq Composite Index .IXIC dropped 20.37 points, or 0.65 percent, to close at 3,116.23.
For the third quarter, the Dow rose 4.3 percent and the Nasdaq climbed 6.2 percent.
For the month of September alone, the Dow gained 2.6 percent and the S&P 500 rose 2.4 percent, while the Nasdaq advanced 1.6 percent.
In contrast, the trend for the week was down, with the Dow off 1.1 percent, while the S&P 500 shed 1.3 percent and the Nasdaq dropped 2 percent.
In Friday's session, stocks came off their lows after Spanish bank stress tests were released, and were mostly within expectations. The independent audit showed banks will need 59.3 billion euros ($76.3 billion) in extra capital to ride out a serious downturn.
But Spain still remains mired in difficulties. Moody's review of the country's credit rating, due later in the day, could add to its challenges. On Thursday, ratings agency Egan-Jones cut Spain's sovereign rating further into junk status, citing the country's faltering banks and struggling regional governments.
The euro fell against the dollar on Friday, declining for a second straight week, as uncertainty persisted about Spain's prospects for receiving a bailout to prop up its ailing banks.
Recent protests in Spain and Greece against austerity plans have also heightened investors' concerns as the turmoil could impede political maneuvering.
Pledges by the European Central Bank, the Federal Reserve and the Bank of Japan to buy government bonds helped cement a summer rally in stocks and commodities.
But markets have lost some of their luster after the announcements from the central banks in the first half of September. After pulling back 1.7 percent over the last two weeks, the S&P 500 is now up 14.6 percent so far this year. The S&P 500's drop of 1.3 percent this week is its worst weekly decline since the start of June.
The coming months hold a series of difficult challenges for markets, including third-quarter earnings season, which is expected to show the first drop in earnings since 2009, and the U.S. presidential election in November.
Nike Inc NKE.N warned of slowing orders in China, becoming the latest company to sound a note of caution about how economic weakness in the world's second-largest economy was affecting its business. Nike's stock fell 1.1 percent to $94.91.
Trading was light on the quarter's last day, when money managers reposition their portfolios. About 6.15 billion shares changed hands on the New York Stock Exchange, Amex and Nasdaq, compared with the average daily volume of 6.38 billion.
Decliners outnumbered advancers on the NYSE by a ratio of 3 to 2, while on the Nasdaq, nearly two stocks fell for every one that rose.
NYMEX- NEW YORK, Sept 28 (Reuters) - U.S. crude futures rose a second straight day on Friday in choppy trading, but uncertainty about Spain's economy ahead of a ratings agency review limited gains after a strong 2 percent rally the previous session on Spain's budget reform plans.
Crude posted a gain of 8.5 percent for the third quarter and the expiring front-month U.S. October gasoline futures rocketed late to rally 19 cents a gallon on the day.
CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade ended higher, supported by a limit rise in corn and a 5 percent climb in wheat that helped the market to shrug off a bearish U.S. government soybean stocks figure, traders said.
* USDA reported U.S. Sept. 1 soybean stocks at 169 million bushels, above a range of trade estimates for 110 million to 152 million.
• USDA also said it raised its estimate of U.S. 2011 soybean production to 3.093 billion bushels, up 37.5 million from its previous estimate.
• CBOT soybeans Sc1 fell 9.3 percent for the month but rose nearly 6 percent for the quarter, the fourth straight quarterly rise.
• USDA confirmed sales of 180,000 tonnes of U.S. soybeans to China for delivery in 2012/13. (Full Story)
• Soyoil trailed the gains in soybeans and soymeal, weighed in part by heavy deliveries on first notice day for October futures. CBOT reported soyoil deliveries at 3,509 contracts, with no strong commercial stoppers.
• CBOT reported five soymeal deliveries on first notice day for October futures.
FCPO- SINGAPORE, Sept 28 (Reuters) - Malaysian palm oil futures dropped to a two-year low on Friday, and posted their worst weekly performance so far this year, as bearish investors were discouraged by the rapidly progressing soybean harvest in the United States.
Palm oil is used as a substitute for soybean oil, and U.S. soybean futures SX2 have lost more than 9 percent since the beginning of last week, their biggest two-week slide in a year, due to the harvest data and reports that yields were not as badly hit by drought as expected.
"It's the end of the week, and market dropped heavily. We see further liquidation," said a trader with a foreign commodities brokerage in Malaysia. "Both technicals and fundamentals are bearish. Everything looks bad."
Palm oil futures fell as far as 2,534 ringgit ($830) per tonne, the lowest since September 2010, and have lost almost 8 percent this week. For the quarter, prices recorded their steepest loss since the final quarter of 2008.
The benchmark December contract FCPOc3 on the Bursa Malaysia Derivatives Exchange lost 2.3 percent to close at 2,546 ringgit per tonne.
Prices fell even though analysts expect the U.S. Department of Agriculture (USDA) quarterly report, due to be released on will show soybean stocks as of Sept. 1 at an eight-year low.
Total traded volumes stood at 36,951 lots of 25 tonnes each, much higher than the usual 25,000 lots.
Palm oil prices have lost close to 16 percent this month, their worst performance since October 2008.
"The palm oil price is usually weak in September, possibly since production peaks during the month, during which there may potentially be high inventory," Malaysia's OSK Investment Bank said in a research note.
Traders have been pricing in a build in stocks in No.2 producer Malaysia in September that could push inventories above a 10-month high hit in August, with exports not climbing enough to offset high production.
Cargo surveyors Intertek Testing and Societe Generale de Surveillance reported 8 and 11 percent increases respectively in exports for Sept. 1-25 and will issue exports data for the full month on Monday. PALM/ITS PALM/SGS
In a bullish sign for palm oil, oil prices were firmer above $113 on Friday as plans for economic reform in Spain temporarily eased investor concerns about Europe's debt crisis, while heightened tensions between Israel and Iran also provided support.
In other vegetable oil markets, U.S. soyoil for December delivery BOZ2 lost 1.4 percent in late Asian trade.
The most active January 2013 soyoil contract DBYF3 on the Dalian Commodity Exchange closed 0.1 percent higher on the last trading session before a week-long holiday.
REGIONAL EQUITY- BANGKOK, Sept 28 (Reuters) - Most Southeast Asian stock markets rose on Friday, racking u p strong gains for the quarter, as global markets welcomed Spain's spending cuts, but Moody's downgrades dented Vietnam's banks and the broader Ho Chi Minh Stock Exchange's VN Index .VNI.
Thailand's benchmark SET index .SETI led the pack, rose nearly 1 percent to end at its highest close since May 1996. It posted a 10.8 percent gain for the July-September quarter, Southeast Asia's best, reversing a 2.1 percent loss of the previous quarter.
Optimism over Thai banks' earnings for the third quarter boosted buying interest, said Bangkok-based strategist Viwat Techapoonphol of Tisco Securities.
Among actively traded, Bank of Ayudhya Pcl BAY.BK rose 3.3 percent, snapping a six-day losing streak. It was under selling pressure early this week after a stake sale by shareholder General Electric Co GE.N
The Ho Chi Minh Stock Exchange's VN Index reported a 7.1 percent quarterly fall, the region's worst, adding on a 4 percent fall for the second quarter.
On Friday, Moody's Investors Service downgraded Vietnam's sovereign credit rating by one notch to B2, citing stresses in the banking industry. It cut local and foreign currency deposit ratings of all eight Moody's-rated Vietnamese banks.
