The worst week for US stocks in two months ended with traders mostly sitting it out on Friday as they waited for politicians in Europe and the United States to tackle festering debt problems. The Dow and S&P 500 were little changed and the Nasdaq composite index fell.
---- Benchmark index confirms drop below 1,225
Friday's directionless market showed more exhaustion than relief as Europe remained investors' primary worry. Stocks found support after Italian and Spanish bond yields fell thanks to buying by the European Central Bank. In the United States, doubts grew whether a bipartisan committee could come up with budget cuts and tax increases that Congress can agree on next week.
Financial shares, which have been among the most sensitive to euro zone financial strains, rose on Friday. The S&P financial index was up 0.5 percent. Morgan Stanley shares edged up 0.6 percent to $14.21 but fell more than 13 percent this week. A major question has been whether the European Central Bank will find a way to act as a lender of last resort in the manner of the US Federal Reserve. Speculation has grown the ECB could lend money to the International Monetary Fund to bail out some euro zone members.
"It's hard to see the ECB changing roles, but on the other hand the powers to be have to be very aware of the consequences if this gets out of control," said John Manley, chief equity strategist at Wells Fargo advantage funds in New York. "I can't imagine it is allowed to go to a level that it causes serious harm to the marketplace."
The Dow Jones industrial average gained 25.43 points, or 0.22 percent, to 11,796.16. The S&P 500 dipped 0.48 point, or 0.04 percent, to 1,215.65. The Nasdaq Composite lost 15.49 points, or 0.60 percent, to 2,572.50. For the week, the Dow fell 2.9 percent, the S&P dropped 3.8 percent and the Nasdaq lost 4 percent.
The S&P failed to rise above 1,225 after a drop below it on Thursday triggered massive selling, and it is now strengthening as technical resistance. Little conviction characterised this week's market action as traders worried changes in governments in Greece and Italy failed to bring bond yields much lower.
Spain's likely new leader, centre-rightist Mariano Rajoy, pleaded with financial markets for breathing room to start tackling the country's economic crisis if he wins power in a parliamentary election this weekend. "If people don't see politicians standing behind change, markets are ready to force change," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.
While investors try to come to grips with how much of an impact the European crisis may have on the US economy, data for the United States showed continued improvement. A gauge of future US economic activity rose more than expected in October, according to the Conference Board. About 6.7 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq on Friday, below the current daily average of 8 billion shares. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 13 to 10, while on the Nasdaq decliners beat advancers 1,259 to 1,226.
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