LONDON (Reuters) – Weakness in banks and commodity stocks dragged Britain's leading share index lower on Monday as the protracted search for a Greek bond deal and concerns about economic growth kept investors nervous.

The FTSE 100 (.FTSE) index closed down 62.36 points, or 1.1 percent, at 5,671.09, extending Friday's falls and retreating further from Thursday's six-month closing high.

The FTSE volatility index (.VFTSE) was also active, up over 10 percent, its biggest daily percentage rise in a month and signaling an increase in risk aversion.

Banks (.FTNMX8350) were the biggest blue-chip casualties, hit by concerns that extra liquidity injections from central banks had not addressed the sector's fundamental problems.

Credit Suisse reduced its recommendation on the European Banking sector to "underweight" as it said the direct earnings impact of the European Central Bank's (ECB) late-December splurge of cheap, long-term cash for the banks appeared to be over-estimated.

Barclays (BARC.L) was the UK sector's biggest faller, down 4.2 percent, while Lloyds Banking Group (LLOY.L) shed 4.1 percent, and Royal Bank of Scotland (RBS.L) fell 3.5 percent.

EU leaders met in Brussels on Monday, the first summit of 2012, to sign off a permanent rescue fund for the euro zone — Britain's biggest trading partner — though the meeting was overshadowed by the unresolved Greek debt problems.

To avoid a chaotic default, which could have grave ramifications for sentiment and financial systems across the globe, Greece must secure a deal with its private bond holders and persuade international lenders it is serious about reforms in order to secure much-needed cash.

Fresh tensions between Greece and the euro zone's biggest economy Germany over the weekend regarding the debt bail-out terms also knocked sentiment.

"This isn't the first time Greece has shown resistance to accepting certain EU bailout terms and conditions, and given their weak position they may need to concede again, otherwise risk defaulting on the debt repayments due in March," said Jordan Lambert, Trader at Spreadex.

U.S. blue chips (.DJI) were down 0.6 percent by London's close, also suffering on concerns over the Greek debt situation, and after further dull U.S. economic data.

U.S. consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings, setting the tone for a slowdown in demand early in 2012.

COMMODITIES DIP

Weakness in commodity issues also weighed on blue chips in London, with a retreat in crude knocking the integrated oils (.FTNMX0530) as an expected Iranian vote to suspend crude exports to Europe was postponed, easing supply concerns.

Miners (.FTNMX1770) also moved lower in tandem with weaker metal prices, as softer-than-expected U.S. economic data fuelled concerns about demand levels.

Defensive stocks dominated on the short list of blue chip gainers, led by drugmakers, with AstraZeneca (AZN.L) and GlaxoSmithKline (GSK.L) up 0.6 percent and 0.5 percent.

AstraZeneca will post fourth-quarter results on Thursday.

Utilities were in demand, with energy generator International Power (IPR.L) up 0.6 percent, and power distributor National Grid (NG.L) ahead 0.5 percent. Both firms are due to issue trading updates later this week.

And chip designer ARM Holdings (ARM.L) gained 0.3 percent, with its fourth-quarter results due tomorrow.

(Reporting by Jon Hopkins; Editing by Will Waterman)

NEW YORK – U.S. stocks fell in early trading Monday. Uncertainty about a debt-reduction deal between Greece and the investors who bought its national bonds weighed on the markets.

An hour after the opening bell, the Dow Jones industrial average was down 113 points, or 0.9 percent, at 12,546. Bank of America and JPMorgan Chase dropped the most of the Dow’s 30 stocks. JPMorgan Chase sank 2 percent, Bank of America 2.8 percent.

The Dow has not had a closing loss of 100 points or more this year.

Greece announced a tentative deal Saturday under which the investors would swap out their Greek bonds for replacement bonds with half the face value. A deal is seen as a key for Greece to get euro130 billion in bailout money and stay afloat. But the talks could still fall apart.

European leaders are also gathering in Brussels, focusing on how to stimulate economic growth when huge government spending cuts threaten to push many countries back into recession.

The latest data showed Spain’s economy shrank in the last three months of 2011.

The broader Standard & Poor’s 500 index is down 14 points, or 1 percent, to 1,302. The losses were widespread: 477 of the 500 companies in the index were down for the day.

The Nasdaq composite is down 30 points, or 1 percent, to 2.786.

European markets are also falling. France’s CAC 40 and Germany’s DAX lost 1.3 percent. The euro dropped 0.6 percent against the dollar.

The Commerce Department said Americans’ income rose in December by the most in nine months. That’s slightly better than what economists expected and a hopeful sign after a year of weak wage gains.

Among stocks making big moves Friday:

• The fast food chain Wendy’s dropped 2.3 percent. The Wendy’s Co. said Monday that a key measure of earnings dropped 30 percent in the fourth quarter. Charges for selling Arby’s offset the effects of a jump in sales.

• PharMerica Corp. plunged 12 percent. The Federal Trade Commission said it was suing to block rival pharmacy company Omnicare Inc. from completing its $457 million takeover of PharMerica. The agency said a merger of the country’s two largest long-term care pharmacies would raise the cost of Medicare prescription plans covering drugs for nursing home residents. Stock in Omnicare Inc. fell 1.9 percent.

• Thomas & Betts Corp. soared 22 percent on news that Swiss engineering group ABB Ltd. agreed to buy the maker of power lines and other electrical products for $3.9 billion in cash.

NEW YORK (Reuters) – Stocks slipped on Friday as data showed the U.S. economy grew less than expected in the fourth quarter, while some disappointing earnings added pressure to the market.

Government data showed U.S. gross domestic product expanded at its fastest pace in 1-1/2 years in the fourth quarter of 2011 but fell shy of expectations. A strong rebuilding of inventories and weak spending by businesses pointed to slower growth early this year, denting recent optimism about an improving economy.

But losses were curbed as Federal Reserve statements this week and economic data kept investors alert for the possibility of another round of monetary stimulus known as quantitative easing, or QE3.

"Out of what the Fed said, you can expect some negative numbers because the Fed obviously saw what the GDP numbers are and they anticipate a slowdown," said Sean Kraus, chief investment officer at CitizensTrust in Pasadena, California.

If the Fed does resort to QE3 to stimulate growth, investors "don't want to be caught flat-footed and be out of risky assets," Kraus said.

Chevron Corp (CVX.N) fell 3.1 percent to $103.26 and was the biggest drag on the Dow after the No. 2 U.S. oil company posted lower earnings, missing Wall Street forecasts. The NYSEArca oil index (.XOI) lost 0.7 percent.

The Dow Jones industrial average (.DJI) dropped 60.06 points, or 0.47 percent, to 12,674.57. The Standard & Poor's 500 Index (.SPX) dipped 2.69 points, or 0.20 percent, to 1,315.74. The Nasdaq Composite Index (.IXIC) gained 7.46 points, or 0.27 percent, to 2,812.74.

Procter & Gamble Co (PG.N) dipped 0.7 percent to $64.35 after said this year's profit would come in lower than previously expected due to the strong dollar.

Ford Motor Co (F.N) shares fell 1.7 percent to $12.52 after the carmaker reported a lower-than-expected fourth-quarter profit on higher commodity costs and losses in Europe and Asia.

Network equipment makers Juniper Networks Inc (JNPR.N) and Riverbed Technologies Inc (RVBD.O) gave first-quarter outlooks after the close Thursday that were below expectations. Juniper fell 3.9 percent to $21.50 while Riverbed plunged 22.4 percent to $23.22.

According to Thomson Reuters data, 58.7 percent of 184 S&P 500 companies reporting earnings through Friday have topped analysts' estimates, below the beat rate of about 70 percent seen at this stage of earnings season in recent quarters.

Utilities moved lower after results from American Electric Power (AEP.N), off 2.9 percent to $40.07, and Dominion Resources (D.N), down 0.8 percent to $50.44. The S&P utilities index (.GSPU) fell 1.1 percent.

Eastman Chemical Co (EMN.N) offered to buy specialty chemical maker Solutia Inc (SOA.N) for about $3.38 billion in cash and stock to extend its reach in emerging markets, particularly the Asia-Pacific region. Solutia shares rose 41 percent to $27.59.

Euro zone finance officials voiced optimism a deal to avert a disorderly Greek default was imminent. Renewed concern about the crisis has troubled markets this week.

(Reporting By Chuck Mikolajczak; 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.

___

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

NEW YORK (Reuters) – Wall Street is set for a slightly lower open on Thursday, giving back some of the gains from the previous session, when the Federal Reserve boosted equities by saying it was likely to keep interest rates near zero until at least late 2014.

At 4:21 a.m. ET, futures for the S&P 500, Dow Jones and Nasdaq 100 were down between 0.1 and 0.3 percent.

The FTSEurofirst 300 (.FTEU3) index of leading European shares was up 0.3 percent at 1,042.50 points, with miners higher on stronger copper prices, which were boosted by the Fed's statement, as were oil prices.

The euro was near five-week highs at $1.3110 though little changed on closing New York levels.

U.S. initial jobless claims are seen correcting up to 370,000 from 352,000 the week before, mostly from the smaller seasonal factor in the week ended January 21 after a reading where claims sunk to a nearly 4-year low. Claims just dropped 50,000 as they worked their way back from a reading that historically sees a rise in the first week of a new year. The data is due at 8:30 a.m ET.

The transportation sector could be a big wildcard for December durable goods, but is seen exerting only a modest drag, pulling the headline down to a 2.0 percent gain from 3.7 percent the month before, according to a Reuters poll of 69 economists.

Starbucks (SBUX.O), the world's biggest coffee chain, reports quarterly results and may offer an early read on the success of its lightest yet "Blonde" roast coffee and an update on its recently introduced K-cups for Green Mountain's (GMCR.O) popular Keurig one-cup brewers.

Other companies reporting include Caterpillar (CAT.N), the world's largest maker of earth-moving equipment and telecoms heavyweight AT&T (T.N).

Big profits from Apple (AAPL.O) and a promise from the Federal Reserve to keep rock-bottom rates for at least two more years powered the U.S. stock market higher on Wednesday.

The Dow Jones industrial average (.DJI) rose 0.7 percent, the Standard & Poor's 500 Index gained 0.9 percent, the Nasdaq Composite Index (.IXIC) ended 1.1 percent higher.

Stanley Black and Decker (SWK.N) shares slipped 1 percent after the bell following the release of its results.

(Reporting by Brian Gorman. Editing by Jane Merriman)

GREECE, REVISTED: Stocks fell Tuesday on concerns that a deal to prevent a default by Greece might fall through. A slew of U.S. corporate earnings did little to bolster investors’ confidence.

THE NUMBERS: The Dow Jones industrial average closed down 33 points at 12,676. It has risen or fallen less than 100 points in 13 trading sessions, the longest calm stretch since March and April of last year.

MOSTLY GREEN: It’s only the third time the S&P has ended lower this year, and all those declines have been less than 7 points. So far this year, it’s up 4.5 percent.

NEW YORK (Reuters) – Stock index futures pointed to a weaker open for equities on Wall Street on Monday, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 down 0.2 to 0.3 percent.

Gas producer Apache (APA.N) is to buy privately owned oil and gas company Cordillera Energy Partners III in a cash-and-stock deal valued at $2.85 billion to expand its acreage of oil and petroleum liquid fields.

News Corp (NWSA.O) is considering bidding for Turkish group Calik Holding's media assets ATV and Sabah, the Wall Street Journal reported citing sources familiar with the matter.

Asda, the British arm of U.S. retailer Wal-Mart Stores (WMT.N), said on Monday it would invest over 500 million pounds ($776 million) this year, opening 25 new stores and three depots and creating up to 5,000 jobs.

CSX, the No. 2 U.S. railroad operator, reports results. It is expected to post higher profit driven by auto and metals shipments.

Texas Instruments (TXN.O) is expected to report weak fourth-quarter results due to broad-based soft demand. Since the company already warned that the fourth quarter would be weak, the focus will be on its guidance for the first quarter.

Semiconductor Equipment and Materials International releases at 4:30 a.m. ET its book-to-bill ratio for December. In November, the ratio was 0.83.

Halliburton (HAL.N), the world's second-largest oilfield services company, is expected to report a sharply higher quarterly profit, and will be watched for any indication of how the U.S. hydraulic fracturing market is holding up.

Euro zone finance ministers will decide on Monday what terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens after negotiators for private creditors said they could not improve their offer.

France and Germany will call on Monday for a relaxation of global bank capital rules to prevent lending to the real economy being choked off, the Financial Times reported on Monday.

European shares (.FTEU3) were flat on Wednesday as investors dumped shares in defensive sectors, offsetting a rally in banks.

U.S. stocks posted their best week since Christmas, even with a mixed finish on Friday after strong earnings from tech bellwethers IBM (IBM.N) and Intel (INTC.O) contrasted with Google's (GOOG.O) disappointing report.

The Dow Jones industrial average (.DJI) closed 0.8 percent higher, the Standard & Poor's 500 Index (.SPX) rose 0.1 percent and the Nasdaq Composite Index (.IXIC) fell 0.1 percent.

(Reporting by Atul Prakash; Editing by Erica Billingham)

NEW YORK (Reuters) – Stocks were set for a slightly lower open on Friday after GE and Google results fell short of expectations and as investors looked for a resolution in the latest round of Greek debt talks.

Google Inc (GOOG.O) shares slumped 7.7 percent to $590.16 in premarket trading after quarterly profit and revenue for the No. 1 Internet search engine missed Wall Street expectations on declining search advertising rates.

General Electric Co (GE.N) lost 2.4 percent to $18.68 after the largest U.S. conglomerate reported roughly flat profit from continuing operations, but revenues missed estimates.

"At this point, we are still at the starting line on earnings season. The good news is that the market has not reacted to the slow start," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Greece and its private bondholders were "converging toward" a long-awaited debt swap deal, sources said, with an initial agreement possibly coming late Friday.

Hopes are that an agreement would prevent the nation from spiraling into bankruptcy and bring some stability to the debt-strained euro zone.

"Economic news has been a little better than expected and we've had a lack of bad news from Europe so investor interest has been buoyed by a little more optimism in terms of investor acceleration, but today just looks like a consolidation day," said Dickson.

Improving economic data in the United States along with signs of euro zone stability has helped push the S&P 500 up 4.5 percent to start the year.

A strong outlook from International Business Machines Corp (IBM.N) and decent results from Intel Corp (INTC.O) and Microsoft Corp (MSFT.O) signaled that corporate leaders were shaking off nervousness about economic growth and boosting technology spending.

Microsoft shares were up 2.4 percent to $28.78, and Intel edged up 1 percent to $25.88 premarket. IBM gained 2.7 percent to $185.34.

S&P 500 futures fell 2.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were off 17 points, and Nasdaq 100 futures dipped 1 point.

Parker Hannifin Corp (PH.N) dipped 4.7 percent to $81 after the industrial parts maker reported a lower-than-expected quarterly profit and cut its full-year forecast.

Economic data on existing home sales was due from the National Association of Realtors for December at 10 a.m. (1500 GMT). Economists forecast a 4.65 million annual rate in December, versus 4.42 million in November.

Chinese factory activity likely fell for a third successive month in January, an early indicator showed, suggesting Beijing's pro-growth policies will remain in place despite early signs a downward drift was slowing.

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)

NEW YORK – A rare disappointing earnings report from JPMorgan Chase battered bank stocks on Friday and helped push the rest of the market lower. Rumors of imminent downgrades for the credit ratings of European governments drove the euro down and sent investors streaming into U.S. debt.

The Dow Jones industrial average fell 48.96 points to close at 12,422.06, a drop of 0.4 percent. Markets were little changed late in the day after France’s finance minister confirmed that Standard & Poor’s had stripped the country of its AAA credit rating.

Before the market opened, JPMorgan said quarterly profit declined 23 percent from a year earlier, slightly worse than what analysts expected. The bank’s stock lost 2 percent, and other large banks followed. Morgan Stanley fell 3 percent and Goldman Sachs 2 percent.

It was the first time JPMorgan missed Wall Street expectations since the final quarter of 2007, a period that includes the financial crisis of 2008 and 2009. JPMorgan is widely considered one of the best-managed big banks. Traders figured that if JPMorgan had trouble as 2011 came to a close, the rest of the industry probably did, too.

“JPMorgan is the gold standard,” said Phil Orlando, chief equity strategist at Federated Investors. “So what happens to the banks that aren’t quite as strong and aren’t quite as well-managed?”

On trading desks, it’s called the “cockroach theory,” Orlando said. “You never see just one cockroach. If you see one, you know there’s bound to be a lot more.”

The euro slipped to its lowest level in 17 months after reports surfaced that S&P would downgrade European governments. After the markets closed in New York, S&P announced cuts for France, Austria, Italy and Spain.

The euro dropped 1.1 percent against the dollar to $1.27. Borrowing costs jumped for France, Italy and Spain, countries at the center of the region’s debt crisis.

The dollar and U.S. Treasury prices rose as investors moved money into lower-risk assets. The yield on the 10-year U.S. Treasury note fell to 1.86 percent from 1.93 percent late Thursday.

S&P warned Dec. 5 that 15 countries that use the euro were at risk of downgrades, citing higher borrowing costs for top-rated governments and disagreements among European leaders.

A cut to France’s credit rating may fail to push rates up for France because bond traders were prepared for it, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

The danger is to the European rescue fund. France is the second-largest contributor to the fund behind Germany. Bond traders could respond to the French downgrade by raising borrowing costs for the rescue fund, in the expectation that its rating will be cut next.

“The knock-on effects are far more significant than the impact on France itself,” LeBas said.

JPMorgan’s results opened the earnings season for banks on a sour note. Though an increasing pace of earnings reports may help steer the markets over the coming days, Europe’s debt crisis is likely to remain the focus.

In other trading, the S&P 500 index fell 6.41, or 0.5 percent to 1,289.09. The Nasdaq composite index fell 14.03, or 0.5 percent, to 2,710.67. Even with Friday’s fall, all three indexes posted gains for the second straight week. The S&P 500 index is up 2.5 percent to start the year.

Among stocks making larger moves than the overall market Friday:

• Diamond Foods Inc., which makes Emerald Nuts, plunged 10 percent after The Wall Street Journal reported that federal prosecutors had opened a criminal inquiry into its financial practices. The Journal also reported that two large shareholders had dumped most of their stakes in the company.

• Safeway Inc., the grocery store chain, rose 1.8 percent. An analyst at Jefferies placed a “buy” rating on the stock on the expectation that the company will benefit from an improving job market, especially in California.

• Alpha Natural Resources fell 10 percent, the largest loss in the S&P 500. The coal company bought Massey Energy last year, and the Justice Department is considering whether to prosecute the people who ran Massey when its Big Branch mine exploded in 2010.

NEW YORK – Bank stocks led the market lower Friday after JPMorgan Chase, the country’s largest bank, reported a rare earnings miss. Reports that several European governments were about to get their credit ratings cut also drove the euro down and sent Treasury prices higher.

The Dow Jones industrial average was down 87 points to 12,384 as of 2:30 Eastern time. That’s a drop of 0.7 percent. Markets were little changed after France’s finance minister confirmed that Standard & Poor’s had stripped the country of its top AAA credit rating.

JPMorgan Chase & Co. lost 3.2 percent, the most in the Dow. Other major banks also fell. Morgan Stanley fell 3.1 percent and Goldman Sachs Group Inc. fell 2.6 percent.

It was the first earnings miss for JPMorgan since the final quarter of 2007, a period in which a credit crunch began taking a toll on financial markets. JPMorgan is widely considered one of the best-managed big banks. Among traders, the thinking is that if JPMorgan had trouble in the fourth quarter of 2011, the rest of the industry will likely have trouble, too.

“JPMorgan is the gold standard,” said Phil Orlando, chief equity strategist at Federated Investors. “So what happens to the banks that aren’t quite as strong and aren’t quite as well-managed.”

It’s called the “cockroach theory” on trading desks, Orlando said. “You never see just one cockroach. If you see one, you know there’s bound to be a lot more.”

The euro slipped to its lowest level in 17 months after reports came out that Standard & Poor’s may follow through on warnings to cut credit ratings for European governments. The euro dropped 1.2 percent against the dollar to $1.26. Borrowing costs jumped for France, Italy and Spain, countries at the center of the region’s debt crisis.

The dollar and U.S. Treasury prices rose as investors moved money into lower-risk assets. The yield on the 10-year U.S. Treasury note fell to 1.84 percent from 1.93 percent late Thursday.

Standard & Poor’s warned Dec. 5 that 15 countries that use the euro were at risk of getting downgraded, citing higher borrowing costs for top-rated governments and ongoing disagreements among European leaders.

The weakness at JPMorgan opened the season for bank earnings on a sour note. Though a pickup in the stream of U.S. earnings may help steer markets over the coming days, Europe’s debt crisis is likely to remain the focus.

In other trading, the Standard & Poor’s 500 index fell 9, or 0.7 percent to 1,286. The Nasdaq composite fell 17, or 0.6 percent, to 2,706.

Even with Friday’s fall, all three indexes remain on track to post gains for the second straight week.

Among stocks making larger moves than the overall market Friday:

• Diamond Foods Inc., which makes Emerald Nuts, plunged 11 percent after The Wall Street Journal reported that federal prosecutors opened a criminal inquiry into its financial practices. The Journal also reported that two large shareholders have dumped most of their stakes in the company.

• Safeway Inc. rose 2.3 percent. An analyst at Jefferies placed a “buy” rating on the stock on the expectation that the grocery store chain will benefit from an improving job market, especially in California.

• Alpha Natural Resources fell 10 percent, the largest loss in the S&P 500. The coal company bought Massey Energy last year, and the U.S. Department of Justice is considering whether to prosecute those who ran Massey when its Big Branch mine exploded in 2010.