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Wall Street came back from heavy losses in afternoon action as traders weighed a flurry of media reports suggesting Standard & Poor's will soon slice the credit rating of several eurozone countries.
The Dow Jones Industrial Average fell 49 points, or 0.39%, to 12422, the S&P 500 dipped 6.4 points, or 0.49%, to 1289 and the Nasdaq Composite skidded 14 points, or 0.51%, to 2711.
While the markets still closed in the red, they managed to make a significant comeback. Indeed, the Dow had been down by 158 points at the lows of the session. The markets ended the week in positive territory overall: the Dow was up 0.5%, the S&P gained 0.9% and the Nasdaq rallied 1.4%.
Financial shares took the biggest beating on Friday. Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) were all down more than 2%. Investment banks such as Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) sustained heavy selling as well. Also struggling were basic material companies, like Alcoa (NYSE:AA).
However, many stocks made a late-session comeback. Indeed, multiple Dow components ended to the upside, led by Chevron (NYSE:CVX). Several big-name technology companies performed strongly as well. In fact, Netflix (NASDAQ:NFLX) and Amazon.com (NASDAQ:AMZN) rallied more than 1%.
There were a plethora of corporate, economic and eurozone headlines to parse through on Friday.
Downgrade Sparks Weigh on Sentiment
Multiple media reports, citing European Union sources, saying Standard & Poor's may be planning on imminently downgrading several eurozone countries heightened fears about Europe. France, Italy and Austria appeared to be within S&P's cross hairs, according to reports, while it appeared Germany and the Netherlands would be spared.
There has been talk among market participants for weeks that the ratings company may slash France's pristine triple-A rating, although such a move has not materialized. If it were to occur, however, it could potentially make it harder for the European Union to assist embattled sovereigns because it may lessen the rating of the bloc's bailout vehicle that is supported by the strongest EU countries. Germany is Europe's second-biggest economic player, followed by France.
The euro was off 1% to $1.2682, touching the lowest level since September 2010, while the U.S. dollar was up 0.82% against six world currencies.
JPMorgan was the first major U.S. bank to report its fourth-quarter earnings.
The banking giant posted a profit of $3.72 billion, or 90 cents per share, meeting expectations, but falling short of the $4.83 billion, or $1.12 a share, it earned in the same period a year prior. The company's revenue came in at $22.2 billion, slightly short of the $23 billion analysts anticipated.
Consumer Sentiment Data Beat Expectations, Trade Report Disappoints
Consumer confidence rose in early January to the highest level since May, according to a private survey released on Friday. The Reuters/University of Michigan gauge of consumer sentiment jumped to 74 from 69.9 in December, topping estimates of 71.5.
"Better job prospects, lower gasoline prices, and stock market gains are helping to improve consumers’ moods and confidence in the recovery," IHS Global Insight Director of Financial Economics, Paul Edelstein, wrote in a research note.
"While we cannot say that consumers are 'optimistic,' they appear much less pessimistic compared to last summer when news on the [eurozone] debt crisis turned particularly ugly and the debt-ceiling debate was fought."
The U.S. trade gap rose to $47.8 billion in November -- the highest since June -- from $43.3 billion the month prior as exports fell and imports jumped. Economists expected the deficit to hit $45 billion. The difference between exports and imports directly affects broader measures of economic growth, such as gross domestic product.
Traders were also paying close attention to the European sovereign debt markets. Italy saw its borrowing costs fall at an auction on Friday following a successful offering in Spain the day earlier. The country sold three-year paper at a yield of 4.83%, sharply lower than the 5.62% it paid at a similar auction. Still, the country only sold its targeted amount of 4.75 billion euros at the auction, following Spain, which sold double its target.
Energy markets were mixed, finding some support on supply concerns caused by tensions in Iran and Nigeria. The benchmark crude oil contract traded in New York dipped 40 cents, or 0.4%, to $98.70 a barrel. Wholesale RBOB gasoline rose 0.11% to $2.73 a gallon.
In metals, gold fell $16.90, or 1%, to $1630 a troy ounce. U.S. Treasury prices were up, pushing yields lower. The benchmark 10-year note yields 1.872% from 1.923%.
European blue chips slumped 0.47%, the English FTSE 100 fell 0.68% to 5,624 and the German DAX dipped 0.77% to 6,131.
In Asia, the Japanese Nikkei 225 rallied 1.4% to 8,500 and the Chinese Hang Seng tacked on 0.57% to 19,204.