Blue Chips Hug Flatline After Fitch Warning
FOX Business: The Power to Prosper
The Dow clung to the unchanged mark and Nasdaq Composite remained in the green Friday afternoon as Wall Street attempts to overcome a credit-ratings downgrade threat from Fitch and Zynga's IPO dud.
Today's Markets
As of 2:37 p.m. ET, the Dow Jones Industrial Average fell 12.26 points, or 0.10%, to 11856.02, the Standard & Poor's 500 Index gained 2.19 points, or 0.18%, to 1217.94 and the Nasdaq Composite jumped 12.80 points, or 0.50%, to 2553.67.
Stocks hit session lows in mid-afternoon action, with the blue chips sinking into negative territory after Fitch warned it may need to downgrade its ratings on a slew of eurozone nations. Earlier, Wall Street rallied around rising bond prices in Europe and relatively benign U.S. inflation data.
Those early gains came after a slew of upbeat economic reports on Thursday helped put a stop to Wall Street's three-day slump. Still, even if Wall Street manages to close higher, the markets remain on track to end the week deeply in the red.
“It’s tough to paint a positive narrative in the near-term for equities because we’re so uncertain about the pace of change in Europe,” said Nicholas Covas, chief market strategist at ConvergEx.
U.S. stocks came under pressure after Zynga's (NASDAQ:ZNGA) stock quickly broke below its IPO price once it debuted trading. While its $1 billion IPO marks the largest U.S. Internet IPO since Google (NASDAQ:GOOG) in 2004, it is alarming to see it break its offer price so quickly.
The poor showing for Zynga weighed on similar next-generation Internet stocks like Groupon (NASDAQ:GRPN), LinkedIn (NYSE:LNKD) and Pandora Media (NYSE:P).
Still, the Nasdaq Composite outperformed its peers in the wake of a pair of mixed earnings reports that were released after Thursday's close. While Adobe Systems (NASDAQ:ADBE) rallied around its earnings beat, BlackBerry maker Research in Motion (NASDAQ:RIMM) plunged more than 11% due to its sobering results and a disclosure of another key product delay.
Further pressure came from Fitch, which said it may need to downgrade France, Italy, Spain, Ierland, Italy, Belgium, Slovenia and Cyprus. The ratings company reignited concerns about the European sovereign debt crisis, saying a comprehensive solution is "technically and politically beyond reach." The news knocked the euro off its highs, but the currency was recently up 0.02% to $1.3020.
Earlier in the day global financial markets cheered after Italy's lower chamber of Parliament approved a crucial package of measures aimed at easing its debt crisis by reassuring the jittery bond markets. Likewise, European bonds, especially those with shorter maturities, rallied.
On the economic front, Wall Street received an update on inflation at the consumer level. The Commerce Department said U.S. consumer prices were unchanged month-over-month in November, compared with forecasts for a slight rise of 0.1%. Excluding food and energy, prices at the consumer level gained 0.2%, slightly hotter than estimates for 0.1%.
While the markets remain under pressure from Europe, Wall Street could stand to gain from entering two of the lightest trading weeks of the entire year due to the holidays.
“I would not be surprised if the S&P could rally to be up on the year,” said Covas, noting it is only down about 2.5% on the year. “On light volume you could get a bounce. But these are purely technical factors.”
In the commodities complex, crude oil fell 34 cents a barrel, or 0.36%, to $93.53. Gold settled down $21.00 a troy ounce, or 1.33%, at $1,595.60, but still plunged 8.7% on the week -- its steepest one-week decline since late September.
Corporate Movers
United Rentals (NYSE:URI) inked a $1.87 billion deal to acquire rival equipment rental company RSC Holdings (NYSE:RRR) in a cash-and-stock deal aimed at combining forces and creating synergies. The transaction carries a 58% premium on RSC's Thursday close.
Darden Restaurants (NYSE:DRI) disclosed an in-line 28% drop-off in profits due to deteriorating sales at its Olive Garden restaurants. Revenue increased 6.1% to $1.83 billion, matching estimates.
Global Markets
The U.K.'s FTSE 100 dropped 0.25% to 5387.34, the German DAX slumped 0.50% to 5701.78 and the French CAC 40 declined 0.88% to 2972.30.
In Asia, Japan's Nikkei 225 gained 0.29% to 8401.72 and Hong Kong's Hang Seng leaped 1.43% to 18285.40.