NEW YORK (Reuters) – Stocks edged lower on Monday on stalled Greek debt talks, but an afternoon rally cut losses in a sign of the underlying resilience the market has shown early in the year.

Major indexes had fallen more than 1 percent as negotiations between the Greek government and private bondholders over the restructuring of 200 billion euros of debt failed to reach an agreement before the start of a summit of European leaders.

But by the afternoon those losses were cut sharply. Optimism that the U.S. markets can shrug off Europe's troubles has fueled gains in 2012, with the S&P 500 up 4.7 percent this month. Money managers, some of whom missed the upward move, appear willing to buy on intraday declines.

"The action that we've seen today is very similar to what we've seen throughout most of the year so far," said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago. "We see the resilience showing in U.S. markets and I think that's a theme that we've seen throughout 2012."

"The U.S. appears to be slowly, slowly in the early stages of a decoupling from the euro zone," he said.

Financial shares were hurt the most by developments in Europe. The sector (.GSPF) lost 1 percent, the biggest drag on the S&P 500. Bank of America (BAC.N) fell 3 percent to $7.06.

Material, technology and telecoms stocks led the turnaround after the close of European markets. The S&P 500 materials sector (.GSPM), which is up over 11 percent already this year, finished barely lower on Monday.

But volume was low at just 6.2 billion shares on the NYSE, Amex, and Nasdaq. That indicated participation was light and likely amplified market movements. The 200-day moving average for volume at those venues is 7.8 billion.

Peter Lee, chief technical strategist at UBS Wealth Management, said many of his clients, who include some big institutional investors, are still cautious after the S&P 500 has climbed over 22 percent from lows in October.

"Some buyers are supporting this market, and we think it may be short-covering," he said. "It gives the market the illusion it is strong."

The Dow Jones industrial average (.DJI) dropped 6.74 points, or 0.05 percent, to 12,653.72. The Standard & Poor's 500 Index (.SPX) lost 3.31 points, or 0.25 percent, to 1,313.02. The Nasdaq Composite Index (.IXIC) fell 4.61 points, or 0.16 percent, to 2,811.94.

European stock markets were down over 1 percent. The FTSEurofirst 300 (.FTEU3), a measure of Europe's biggest companies, fell 1 percent.

Even though the euro zone crisis drags on, the S&P 500 was on track for its best month since October, helped by stronger U.S. economic data and a easing of conditions in Europe's financial system following backing from global central banks.

Technical analysts will take comfort from the fact that the S&P 500 held above the psychologically important 1,300 level after crossing it for the first time in six months earlier in January. The bounce off the level on Monday was to a tee.

Germany sought to tone down reports it was pushing for Greece to give up control over its budget policy to European institutions. Greece was unlikely to accept that scenario, presenting yet another obstacle to a second bailout package for Athens.

Apple (AAPL.O) shares helped cap losses on the Nasdaq after Morgan Stanley said the iPhone maker could add China Telecom (0728.HK) and China Mobile (0941.HK) as distributors over the next year. Apple rose 1.3 percent to $453.01.

Swiss engineering group ABB (ABBN.VX) agreed to buy U.S. electrical components maker Thomas & Betts Corp (TNB.N) for $3.9 billion in cash, sending shares of the company up 23.1 percent to $71.31.

Consumer spending, the main pillar of the U.S. economy, was flat in December as households added to savings after the largest rise in income in nine months. Although the data pointed to a slow start for spending in 2012, economists were cautiously optimistic that an improving labor market will support demand.

Chris Cordaro, chief investment officer at RegentAtlantic Capital, a wealth management firm in Morristown, New Jersey, believes equities will finish sharply higher this year as Europe's problems are resolved and investors buy into stock valuations that were beaten down through much of last year.

"We could definitely end the year much higher on equities," he said. "We have been favoring equities in our portfolio. We have just increased our exposure to emerging markets."

(Editing by Kenneth Barry)

A brief morning rally Thursday pushed the Dow Jones industrial average above its highest close since the financial crisis of 2008, but stocks finished lower for the day after mixed economic data tempered traders’ optimism.

Solid news on factory orders and strong earnings from U.S. manufacturers, highlighting one of the economy’s bright spots, helped the market open higher. The Dow rose 85 points.

But the Dow and broader indexes turned negative after weaker reports on home sales and future economic growth were released in the late morning. The Dow closed down 22.33 points, or 0.2 percent, at 12,734.63.

The Dow and other indexes are still up sharply for the year, and for about 45 minutes Thursday morning, the Dow traded above 12,810.54, its peak from last year and the highest close since the spring before the 2008 financial crisis.

Traders appear less afraid of spillover damage from the European debt crisis, and data on jobs and manufacturing have been consistently strong. The Dow is up more than 4 percent for the year.

“With global risk off center stage and attention going back to the fundamentals, this market was ready to explode, which is exactly what it is doing,” said Doug Cote, chief market strategist with ING Investment Management.

The government reported early Thursday orders to factories for long-lasting manufactured goods increased in December for the second straight month, and a key measure of business investment rose solidly.

That strong demand was apparent in quarterly earnings reports from U.S. manufacturers. 3M stock closed 1.3 percent higher after its fourth-quarter profit beat Wall Street’s estimates.

Caterpillar, the world’s biggest heavy equipment maker, rose 2.1 percent, the most of the 30 companies in the Dow, after beating analysts’ estimates last quarter. The company expects to do the same this year as global demand remains high.

Later in the day, the government reported an unexpected drop in new home sales in December, capping the worst year for home sales since record-keeping began in 1963. A private gauge of future economic activity also grew more slowly than expected.

3M and Caterpillar led the gains for the Dow. AT&T dragged the average lower, falling 2.5 percent after its earnings missed Wall Street’s forecasts. AT&T depends heavily on the Apple iPhone but recently lost its exclusive rights to sell it in the U.S.

The Dow’s post-crisis high during the trading day was 12,928.45, reached May 2, 2011. It traded as high as 12,841.95 on Thursday. The average would need to rise about 11 percent to get to its record high close of 14,164.53, reached on Oct. 9, 2007.

The Standard & Poor’s 500 closed down 7.63 points, or 0.6 percent, at 1,318.43. It was dragged lower by volatile financial companies and telecommunications firms including AT&T. Its post-crisis peak was 1,370.58, also set May 2, 2011.

The Nasdaq shed 13.03 points, or 0.5 percent, to close at 2,805.28.

Stocks had their highest close in eight months Wednesday after the Federal Reserve said it plans to keep interest rates extremely low until late 2014 to encourage lending and investment and support the economic recovery.

The yield on the 10-year Treasury note fell to 1.93 percent late Thursday from 1.99 percent late Wednesday. The prospect of more bond-buying by the Fed helped make Treasurys more attractive. A bond’s yield falls as demand for it increases.

Among the other U.S. companies making big moves after reporting quarterly earnings:

• Time Warner Cable Inc. rose 7.8 percent after the company reported earnings far above analysts’ estimates. It also raised its dividend 17 percent to 56 cents per share and announced plans to buy back more of its own stock.

• United Continental Holdings, parent of United and Continental airlines, surged 6.3 percent. Its fourth-quarter loss narrowed, its adjusted earnings were more than double what analysts had expected, and the cost of integrating the two companies fell.

• Netflix soared 22.1 percent, the most of any stock in the S&P 500, after the video streaming and DVD-by-mail company reported a huge gain in customers and a bigger fourth-quarter profit than analysts had expected.

• Colgate-Palmolive rose 1.9 percent after saying it will raise prices in the U.S. for the first time in years to cover higher costs for materials. The company’s profit declined last quarter, but core sales in emerging markets were much stronger.

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Follow Daniel Wagner at http://www.twitter.com/wagnerreports.

NEW YORK (Reuters) – Stocks advanced on Tuesday, pushing the S&P 500 to its highest since early August, but sharply pared gains late in the session as Citigroup's steep drop in profit gave investors a reason to unload bank shares.

The financial sector, which has outperformed the broader market so far this year, took a hit on investors' disappointment with Citigroup Inc's (C.N) earnings.

Citigroup's stock slid 8.1 percent to $28.25 after it reported weaker-than-expected earnings.The KBW Banks Index lost 1.4 percent. Through Friday, the KBW Banks Index was up about 10 percent for the year, while the S&P 500 was about 2 percent higher.

The banks' sell-off splashed cold water on a rally that drove the S&P 500 through 1,300 for the first time since August.

Stocks rallied about 1 percent across the board after data showed China's economic growth was better than expected, even though it expanded at the weakest pace in 2-1/2 years.

"The better numbers out of China this morning got the market off to a better start, but then there wasn't much follow-through, and you have had what looked to be from JPMorgan and Citigroup not very good-looking earnings," said Eric Kuby, chief investment officer of North Star Investment Management Corp., in Chicago.

Citigroup's results followed similarly disappointing earnings on Friday from JPMorgan Chase & Co (JPM.N).

The Dow Jones industrial average (.DJI) rose 60.01 points, or 0.48 percent, to 12,482.07 at the close. The Standard & Poor's 500 Index (.SPX) added 4.58 points, or 0.36 percent, to 1,293.67. The Nasdaq Composite Index (.IXIC) gained 17.41 points, or 0.64 percent, to 2,728.08.

After the bell, shares of Yahoo (YHOO.O) shot up 3.6 percent to $15.99 in extended-hours trading following news that Yahoo co-founder Jerry Yang resigned. [ID:nL1E8CHCYY] In regular trading, Yahoo's stock slipped 0.3 percent to close at $15.43.

Also after the close, shares of Cree (CREE.O), LED lighting maker, fell 5.5 percent to $22.05 in extended-hours trading after reporting a profit that fell short of analysts' estimates and giving a revenue forecast below expectations. Cree's stock had closed on Nasdaq at $23.33, up 1.9 percent.

Bank shares also suffered on Friday ahead of the widely expected announcement by Standard & Poor's that it was downgrading the credit ratings of nine euro-zone countries.

"It was expected that some of the big banks would continue struggling, especially those heavily involved in investment banking because that part of the financial system has clearly slowed down," said Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois.

While Wells Fargo & Co (WFC.N) posted a 20 percent jump in quarterly profit, its stock, which earlier had risen more than 1 percent to a session high at $30.69, pulled back sharply from that peak and ended up just 0.7 percent at $29.81.

The Nasdaq outperformed the other major U.S. stock indexes, with shares of Applied Materials (AMAT.O) up 2.4 percent at $11.78. RBC upgraded the stock to "outperform." An index of semiconductor stocks (.SOX) advanced 0.5 percent.

The benchmark S&P 500 briefly moved above 1,300 on an intraday basis for the first time since August 1. Analysts said a substantial move past that resistance point could trigger more buying.

On the downside, Carnival Corp (CCL.N) shares slid 13.7 percent to $29.60 as its Italian unit, Costa Crociere, struggled to locate missing passengers after a cruise liner capsized. Fellow cruise operator Royal Caribbean Cruises Ltd (RCL.N) fell 6.2 percent to $26.97.

On the U.S. economic front, a gauge of manufacturing in New York State rose to its highest level in nine months, keeping in line with the trend of modest improvement in U.S. economic data.

Volume totaled 6.8 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, just above the daily average of 6.68 billion.

Advancing stocks outnumbered declining ones on the NYSE by about 3 to 2, while on the Nasdaq, advancers beat decliners by about 13 to 12.

(Reporting By Caroline Valetkevitch,; Editing by Jan Paschal)

NEW YORK – It was only a few nights after the Occupy protesters began sleeping in his church sanctuary when Pastor Bob Brashears realized that his laptop was missing.

The refugees from Manhattan’s Zuccotti Park had found their way to his cavernous Presbyterian church on a cold winter evening, hoping to stay for a few nights, maybe longer. It was the latest stopover for the nomadic group, which has been living in a rotating series of churches since Mayor Michael Bloomberg shut down their camp in November.

“There was a sense of shock and sadness that it had happened,” said Brashears, whose laptop will soon be replaced by Occupy organizers. “And there’s a common understanding that if there’s one more theft in the church, that’s it.”

This is what the Occupy encampment has become: A band of homeless protesters with no place to go. Amid accusations of drug use and sporadic theft, they’ve been sleeping on church pews for weeks, consuming at least $20,000 of the funds that Occupy Wall Street still has in its coffers. Their existence is being hotly debated at Occupy meetings: Are these people truly “Occupiers” who deserve free food and a roof over their heads?

“We don’t do this out of charity,” said 34-year-old Ravi Ahmad, who works for Columbia University and volunteers with Occupy in her spare time. “We do this so that whoever wants to work in the movement can work in the movement. This is a meritocracy.”

But money is draining rapidly from Occupy’s various bank accounts, which currently amount to about $344,000. Including church maintenance costs and meals, living expenses are more than $2,000 per week.

“We are all aware that the NYPD destroyed the tent homes of many Occupiers in just one night,” one Occupier recently wrote on http://www.nycga.net, Occupy’s General Assembly website for New York City. “However, where were they living before Zuccotti Park? Are we paying for housing for homeless people who may be relocated to City shelters?”

The movement that denounces corporate greed and economic inequality has been fighting to stay afloat in the city where it first began. Media attention and donations have dropped off. And although protesters regularly meet to plan demonstrations, recent marches have had none of the spectacle that captivated New Yorkers and watchers worldwide.

On Monday, the metal barricades surrounding Zuccotti Park were removed for the first time since the November raid. But protesters still can’t set up tents to camp overnight — and they don’t have a long-term solution to the housing problem.

Their current home is Brashears’ West-Park Presbyterian Church, a stately 100-year-old house of worship on the Upper West Side that badly needs renovation. Occupy organizers see the cracks in the ceiling as an opportunity to repay the favor by helping to fix the place up.

There are about 70 Occupiers staying there and another 30 or so at Park Slope United Methodist Church in Brooklyn.

“Everybody tries to get along, make things work,” said Donna Marinelli, 52, of New Britain, Conn., who was sitting on the floor in a sleeping bag alongside her cousin, David Monarca. “We were in the park in tents until they raided us. We wanted to stay for the movement. We didn’t want to leave when we just got here.”

During the daylight hours, Marinelli attends Occupy events and volunteers at an Occupy kitchen in Brooklyn. Nobody is allowed to stay in the church during the day. At night, the place is patrolled by an Occupy security team led by Marine Corps Sgt. Halo Showzah, a 27-year-old Iraq war veteran from the Bronx.

“We walk around the church with flashlights, making noise to wake these people up and making sure they’re good,” he said. “No sex in the church, no drinking, no smoking, no shooting, no sniffing.”

The church was quiet and cozy on Wednesday night as about two dozen people staked out their respective corners of the room — some prefer the balcony, others like to curl up by the door. Someone fiddled around on the piano and sang a few songs as a cat watched from one of the pews. Showzah wandered around and chatted with everyone, making jokes and doling out advice to the piano singer.

The security threat is very real here. At least 30 percent of the crowd is a mix of chronically homeless, drug-addicted people, some of whom suffer from “psychological issues,” as several protesters put it delicately. Among other rules, the pastor has demanded that the Occupiers station at least one mental health expert “within easy reach” of the church every night.

Even some of the church dwellers themselves are fed up with their fellow pew mates. Chris Allen, 36, is working on a backup plan in case they get kicked out.

“I feel people are messing up the church and we’re not gonna have it much longer, so I’m worried about putting money in my pocket,” said Allen, an unemployed construction worker from Long Island who lives here with his wife. “Because when it snows and I have nowhere to go, I’m not gonna be stuck on the streets like everyone else for being idiots.”

Who is allowed to stay at the church is a source of contention and perpetual infighting. If you’re not on the official list kept by Occupy organizers, you’re not allowed inside. But it’s unclear what distinguishes the general populace from an Occupier.

One night in December, police officers were called to the Church of St. Paul and St. Andrew when people who weren’t on the list came to the door and refused to leave.

“I was turned away one night in the cold and rain,” said David Everitt-Carlson, a 55-year-old unemployed former advertising executive who lived in a tee-pee at Zuccotti Park. “And I slept at Grand Central Station. I found a place behind a Christmas decoration.”

About a month ago, a telephone hotline was set up so that people could call and request a spot at one of the churches. But space is limited. And each church sojourn has an expiration date.

Some churches willingly opened their doors to provide temporary shelter after the police raid. None of them are equipped to house protesters forever.

“It’s a lot of wear and tear on the space,” said Michael Ellick, a minister at Judson Memorial Church, which housed protesters for several nights in November. “We’re broke, so we don’t have a custodial staff. We can’t be a full-time housing unit.”

During daylight hours, some people migrate down to Occupy’s atrium at 60 Wall St., while others head off to hunt for jobs or disappear into the city. At night, there are often counselors on hand for emotional support.

Typical arguments are reminiscent of life at Zuccotti, which had its own share of criminal activity. A frequent complaint, for example, involves a man who apparently never takes showers.

“No fistfights, no weapons involved,” said Jeff Brewer, 34, an Occupy organizer. “I believe there was a shampoo bottle that was thrown one time.”

Meals are donations from food pantries and leftovers dropped off by nearby restaurants.

The debate over providing food and shelter for the church Occupiers plays into a larger one that has divided New York’s protesters ever since the police raid. While some are determined to occupy another space somewhere in the city, others say an encampment is unnecessary and, at its worst, a burden.

The church dwellers believe they are carrying the torch for the lost encampment — and that, someday, they will form the foundation of a new one.

“We really have been calling it the `occupiers army’ that we are building,” explained protester Jason Harris, a teacher from Massachusetts.

First, though, they’ll have to find a way to survive the winter. Brashears hasn’t yet decided whether he will allow the protesters to stay at West-Park beyond next week. If they are truly dedicated to forming a community — and not simply seeking shelter within the church’s walls — he’ll be more willing to extend their unspoken lease.

“It’s a sort of sink or swim situation,” he said. “I think, long-term, they have to make a decision about what, exactly, their movement is about.”

NEW YORK (Reuters) – Stocks held firm near recent five-month highs on Wednesday as investors awaited key bond market tests for Europe in the next two days that could determine the direction of the euro zone crisis.

U.S. equities have been performing better in the face of turmoil from Europe's sovereign debt problems. This is a major change from four months ago and comes as investors have taken improving U.S. economic data to heart and an optimistic view about corporate earnings.

Wall Street recovered from early losses on Wednesday brought on by a warning from Fitch Ratings of severe repercussions, including a possible collapse of the euro, without more supportive action by the European Central Bank.

The Fitch news sent the euro to its lowest level in 16 months against the U.S. dollar, which would normally have spelled steeper losses for stocks.

"The U.S. is being looked at clearly as the safe-haven trade, not only on the fixed income side but now even from equity investors," said Ken Polcari, managing director at ICAP Equities in New York.

"We keep talking about the same stuff, but it's been that way for eight, nine months … I hate to say it, but it's almost like people are immune to it now."

The benchmark S&P 500 index recovered to close little changed to continue the recent decoupling of U.S. stocks and the movement of the embattled euro.

The Dow Jones industrial average (.DJI) slipped 13.02 points, or 0.10 percent, to 12,449.45. The Standard & Poor's 500 Index (.SPX)(.INX) gained 0.40 point, or 0.03 percent, to 1,292.48. The Nasdaq Composite Index (.IXIC) gained 8.26 points, or 0.31 percent, to 2,710.76.

Key bond auctions later this week from Italy and Spain, two countries at the center of the euro zone crisis, could hurt sentiment if they go poorly.

Materials shares moved higher, boosted by U.S. Steel Corp (X.N), up 4.7 percent to $28.56, after Credit Suisse upgraded fellow metals company AK Steel (AKS.N) to an "outperform" rating. The S&P materials sector (.GSPM) gained 1 percent.

Further reflecting the weakening link between the euro zone and U.S. stock market, the 50-day correlation between the S&P 500 e-mini futures contract and the euro crossed the zero line this week after four months of being in positive territory, indicating they were no longer on the same path.

Chevron Corp (CVX.N) slipped 2.3 percent to $105.35 in extended trade after the No. 2 U.S. oil company gave its fourth-quarter outlook.

Supervalu Inc (SVU.N) shares dropped 12.5 percent to $7.34 after quarterly sales at the third-largest U.S. supermarket chain missed estimates.

Clothing retailer Urban Outfitters Inc (URBN.O), grappling with inventory and declining margins, said its chief executive resigned unexpectedly, sending the company's shares tumbling 18.6 percent to $23.93.

On the Nasdaq, Crocs (CROX.O) shares rose 16.4 percent to $18.56 after the shoemaker said it expects fourth-quarter revenue to be at the high end of its earlier estimate, becoming the latest footwear company to flag strong sales numbers for the holiday season.

Volume was modest with about 6.65 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, almost even with the daily average of 6.7 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,646 to 1,352, while on the Nasdaq, advancers beat decliners 1,482 to 1,009.

(Reporting By Chuck Mikolajczak; Editing by Kenneth Barry)

NEW YORK (Reuters) – U.S. stocks fell more than 1 percent on Wednesday after a hefty year-end rally and the S&P 500 erased gains for the year on renewed concerns about the euro zone's financial health.

The selloff followed the euro's slide to an 11-month low against the U.S. dollar as regional debt worries prompted a wave of selling, with thin trading exacerbating volatility.

"It seems like the weakness in euro, breaking that $1.30 level, really made investors push that 'sell' button," said Ryan Detrick, senior technical strategist with Schaeffer's Investment Research in Cincinnati.

"But it's somewhat of an exaggerated move, considering that there isn't much volume, and this could end in a one-day selloff."

A recent rally on Wall Street had been supported by a series of positive U.S. economic data that encouraged investors to shift their focus from fears about Europe's debt crisis sparking a global recession to optimism that the U.S. economy was on track to recovery.

But "with no domestic economic news to guide the action, much of the focus was on Europe," WhatsTrading.com options strategist Frederic Ruffy said.

U.S. stock index futures had advanced earlier in the session after an Italian debt auction where short-term borrowing costs were halved, potentially a good sign for a sale of longer-dated bonds on Thursday.

But those gains were short-lived, as the euro fell to a session low of $1.2938, its lowest since January, before rising back to trade at $1.2949.

The Dow Jones industrial average (.DJI) fell 139.94 points, or 1.14 percent, to end at 12,151.41. The Standard & Poor's 500 Index (.SPX) dropped 15.79 points, or 1.25 percent, to 1,249.64. The Nasdaq Composite Index (.IXIC) lost 35.22 points, or 1.34 percent, to 2,589.98.

S&P UP 10.5 PCT IN QUARTER

After a 5 percent rally last week that helped Wall Street add to what has been the best quarter in over a year, the S&P 500 pulled back below its 200-day moving average, a closely watched indicator of market strength it has struggled to hold this year.

For the quarter, the S&P 500 is up 10.5 percent.

For the year, the Dow is up 5 percent, while the S&P 500 is down 0.6 percent, and the Nasdaq is off 2.4 percent.

In Wednesday's session, investors concentrated on 2012 with Europe's debt crisis as well as a slowdown in Asia and the impact of Europe's recession on a U.S. recovery on the agenda.

"There are clearly some major hurdles on the horizon," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. "Looking into next year, there is more apprehension about the risks associated with the current climate."

The biggest gaining sectors over the last five days, in cyclical areas like materials and energy, led the market lower on Wednesday, sparked by a drop in commodity prices. The S&P materials sector index (.GSPM) fell 2.2 percent.

Gold sank, tracking industrial metals, on concerns about the prospects for global economic growth next year. It was gold's biggest one-day drop in two weeks.

Medicis Pharmaceutical Corp (MRX.N) fell 1.2 percent to $33.35 a day after cutting its fourth-quarter earnings outlook.

Citigroup Inc (C.N) shed 2.9 percent to $26.13 after U.S. regulators won a delay in a securities fraud lawsuit against the bank. The U.S. Securities and Exchange Commission is seeking to appeal a judge's decision to reject its $285 million settlement with the bank.

Volume was light in the post-Christmas period and ahead of the New Year's Day holiday. Composite volume on the New York Stock Exchange, the Nasdaq and Amex was 4.31 billion shares, well below the year's daily average of around 7.9 billion shares.

On both the NYSE and the Nasdaq, about four stocks fell for every one that rose.

(Reporting By Angela Moon; Editing by Jan Paschal)

NEW YORK (Reuters) – Stocks fell for a third day and hit their lowest level in two weeks on Wednesday as widespread risk aversion sent commodity prices tumbling, drove the euro to its lowest in a year and forced Italy to pay a euro-era high to sell debt.

Based on the latest available data, the Dow Jones industrial average (.DJI) fell 131.39 points, or 1.10 percent, to end unofficially at 11,823.55. The Standard & Poor's 500 Index (.SPX) lost 13.91 points, or 1.13 percent, to finish unofficially at 1,211.82. The Nasdaq Composite Index (.IXIC) dropped 39.96 points, or 1.55 percent, to close unofficially at 2,539.31.

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)

The Dow Jones industrial average closed up 52 points following a report that European leaders are considering more aggressive programs to bail out weaker countries in the region.

Broader market indicators were mixed. The S&P 500 index rose 1 point and the Nasdaq composite edged lower. Materials and health care companies rose the most. Agricultural supplies company Monsanto Co. gained 2.8 percent; drug maker Pfizer Inc. added 2 percent.

Stocks were stuck in neutral for most of the day after Standard & Poor’s said it might downgrade the AAA rating of Europe’s bailout fund. A report in the Financial Times late in the afternoon sent the Dow up as many as 117 points. The newspaper reported that European leaders are considering making more financial aid available to struggling countries.

Investors remain cautious ahead of a summit of European leaders Thursday and Friday where the main task will be coming up with credible plans for preventing a simmering debt crisis from causing a breakup of the euro, the currency shared by 17 European nations. Such a shock would likely cause a deep recession in Europe that would spread through the world economy.

“We are coming to a head in Europe, and it’s no longer about the small countries like Greece,” said Paul Zemsky, chief investment officer at ING Investment Management. He said current stock prices reflect traders’ expectations of a rate cut from the European Central Bank on Thursday and strong political action on Friday. Any less that, he said, and “it’s anyone’s guess show bad things will get, but they’ll get pretty bad.”

The Dow Jones industrial average closed up 52.30 points, or 0.4 percent, at 12,150.13. Among its top performers was 3M Co., which rose 1.5 percent after the maker of Post-It notes forecast 2012 earnings that were stronger that many analysts expected.

The Standard & Poor’s 500 index closed up 1.39 points, or 0.1 percent, to 1,258.47. The Nasdaq composite average closed down 6.20, or 0.2 percent, at 2,649.56.

U.S. stock indexes have risen sharply from the lows they hit during a Thanksgiving-week drubbing. The S&P 500 is up 8.6 percent since Nov. 25, when it closed at 1,158.67.

Late Monday S&P said it might downgrade the debt of 15 countries that use the euro. The announcement, and S&P’s followup statement Tuesday about possibly downgrading the European bailout fund, halted a rally in European markets.

The impact on the market was muted, said Robert Tipp, chief investment strategist with Prudential Fixed Income, because investors are coming around to the view that the European debt crisis may be through its worst phase. He noted that bond traders are willing to accept much lower yields on debt issued by nations such as Italy, whose borrowing costs spiked to dangerous levels in recent weeks.

“There’s going to be volatility going forward, and it’s going to be difficult for countries to follow their commitments, but I think you finally crossed that point where they took enough steps that the markets will get the message” that there is a credible crisis-rescue plan in the works, Tipp said.

In corporate news:

• Leap Wireless International Inc. rose 1 percent after the prepaid mobile phone company said it is buying spectrum in Chicago from Verizon Wireless and sell it spectrum bandwidth nationwide.

• Homebuilder Toll Brothers Inc. added 2.7 percent after it reported fiscal fourth-quarter earnings that beat analysts’ expectations.

• Alpha Natural Resources Inc. fell 1.1 percent after the company agreed to pay more than $200 million to avoid being sued over a 2010 mine disaster that killed 29 men.

• Darden Restaurants Inc. fell 12.4 percent, the most in the S&P 500 index, after the company slashed its profit forecast for 2012. The company is trying to turn around its struggling Olive Garden restaurant chain and cope with rapidly rising food costs.

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Daniel Wagner can be reached at http://www.twitter.com/wagnerreports.

BIG WEEK: The S&P 500 index ended the week up 7.4 percent, its best week since March 2009.

QUIET FINISH: Stock indexes ended nearly unchanged Friday. The Dow Jones industrial average, the S&P 500 index and the Nasdaq composite index each moved less than a point.

EUROPE: Tough talk from German Chancellor Angela Merkel encouraged investors. Merkel made a speech pushing for tighter rules on government spending.

TORONTO (Reuters) – Toronto's main stock index closed lower on Friday as investors booked some profits after the TSX notched its biggest weekly gain in more than two years on optimism that steps were being taken to resolve Europe's debt crisis.

The mining-heavy materials sector dragged the index lower, as shares of gold miners slid despite spot gold edging higher to post its largest weekly gain in more than a month.

This was countered by strong financials, which were lifted by better than expected earnings from two of the country's largest banks.

Also helping investor sentiment was data that showed the U.S. unemployment rate fell to a 2-1/2 year low of 8.6 percent in November as companies stepped up hiring, further evidence the U.S. economic recovery was gaining momentum.

"I would have to think we've had a good week," said Fred Ketchen, director of equity trading at ScotiaMcLeod. "It's Friday and people don't want to go home without locking in some profits. I think we have seen that take place today."

The Toronto Stock Exchange's S&P/TSX composite index ended down 38.20 points, or 0.32 percent, at 12,075.09. Four of the index's 10 sectors were in positive territory.

Goldcorp, Canada's second largest gold producer, was the biggest weight on the index, slipping 3.7 percent to C$52.33. Barrick Gold, the world's No. 1 producer, also dragged on the materials sector, falling 3 percent to C$51.88.

Technology issues also fell, as Research In Motion plunged 9.2 percent to C$17.08 after the BlackBerry maker warned it would fall short of its financial targets after taking a huge charge to write down inventories on its underwhelming PlayBook tablet.

The Bank of Nova Scotia was another big drag on the index, falling 2.49 percent to finish the session at C$48.99, despite announcing a 10.7 percent rise in fourth-quarter profit.

Other banks fared better. The Royal Bank of Canada was the most heavily weighted gainer, up 3.7 percent at C$48.77, after Canada's biggest lender reported a quarterly profit that beat expectations.

No. 2 lender, Toronto-Dominion Bank, was the second top advancer, up 1.18 percent at C$72.75, after announcing stronger than expected results on Thursday.

Despite Friday's slide, the index posted a healthy 5.3 percent gain on the week. On Wednesday, the TSX had its biggest single-day gain since March 2009, jumping more than 4 percent.

Markets also latched on to chatter that policymakers appeared to move a step closer to tackling Europe's debt crisis.

German Chancellor Angela Merkel reiterated her strong support for the euro, and called for a rapid European Union treaty change to remedy the root causes of the euro zone's debt crisis. She warned, however, that Europeans faced a long, hard "marathon" to restore lost market credibility.

Equity strategists and fund managers polled by Reuters predict stocks will continue to grind higher in 2012 as policymakers iron out the euro zone's sovereign debt crisis and improving economic data in Canada and the United States soothes investor concerns about global growth.

"If the next big move is an up move, hold on to your hats, because this will be a run that lasts a number of months," said Brendan Caldwell, president and chief executive of Caldwell Investment Management Ltd.

"The fact that we haven't had a big down move to follow the up move (is) a very, very positive sign."

($1=$1.02 Canadian)

(Additional reporting by Jon Cook; editing by Rob Wilson)