US stocks were little changed on Friday as nagging fears about more bank losses and the biggest monthly decline in the job market in five years overshadowed earlier optimism that the credit crisis may be easing.
Nasdaq, however, edged higher, capping its best week since August 2006, helped by a 3.5 percent rise in Google as investors saw value in shares of the Web search leader following a 32 percent sell-off since the beginning of the year.
Fears about further weakness among banks and brokerages lingered. Bank of America Corp slashed its earnings view on top brokerage Merrill Lynch & Co Inc, while J.P. Morgan Chase cut its annual earnings estimate for Bank of America, largely on expectations for more write-downs. Bank of America, down 2.4 percent, was the biggest drag on the Dow.
Government data also dampened investor enthusiasm after it showed a third month of non-farm job losses and the highest unemployment rate in two and a half years, further evidence that a housing downturn and credit crisis may have pushed the economy into recession.
"Investors are processing the fact that the economic data is confirming what everybody believes, which is that we're in a recession. There's real anxiety about the earnings picture," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We haven't seen the cuts in estimates being deep, yet the economic data suggests a weakening economy."
The Dow Jones industrial average fell 16.61 points, or 0.13 percent, to end at 12,609.42. The Standard & Poor's 500 Index was up 1.09 points, or 0.08 percent, at 1,370.40. The Nasdaq Composite Index was up 7.68 points, or 0.32 percent, at 2,370.98.
Adding to unease about the banking industry, a Keefe, Bruyette & Woods Inc analyst said mortgage and other credit losses may keep Washington Mutual Inc, the largest US savings and loan, from turning an annual profit before 2010. WaMu's shares sank 11.5 percent to $10.17.
General Motors Corp was the second-biggest weight on the Dow. The company said it was "disappointed" by an investor group's decision to pull out of a $2.55 billion equity plan to support its parts supplier Delphi Corp's emergence from bankruptcy. GM shares shed 4.7 percent to $20.58.
Volume was light on the New York Stock Exchange, with about 1.2 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq about 2 billion shares traded, below last year's daily average of 2.17 billion. Advancers beat decliners 17 to 13 on the NYSE and by about 14 to 13 on the Nasdaq.
For the week, the S&P 500 was up 4.2 percent, largely because of strength in the financial sector earlier in the week. "The message from the market is that we've had enough of the negatives, we've done all the selling we're going to do, and now we are looking beyond the valley to better times," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis.
Analysts continued to point to the Federal Reserve's rescue of Bear Stearns and its efforts to expand its provisions of liquidity to more banks last month as a turning point in the credit crisis. This week, strong demand for a Lehman Brothers share offering and a massive $19 billion write-down from Swiss bank UBS made investors more convinced that the worst of the storm in lending markets has passed.
Since mid-September, the Fed has cut short-term interest rates from 5.25 percent to 2.25 percent. Fed Chairman Ben Bernanke said this week that a recession in the first half of 2008 is possible but the economy should pick up later this year.
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