It took the whole day, but stocks came all the way back.

Bruised once again by uncertainty about European debt, the U.S. stock market fell sharply Thursday at the open, then steadily gained ground for six hours. By the close, the Dow Jones industrial average had shaved its loss to less than three points.

It was the first decline of the year for the Dow. The Standard & Poor’s 500 index gained just under four points and managed to extend its January winning streak to three days.

Investors looking for good news had the latest encouraging report on the U.S. job market. Weekly unemployment claims declined again, one day before a crucial report on the national jobs picture in December.

The Dow recovered from a 134-point loss to end at 12,415.70. The Standard & Poor’s 500 index closed at 1,281.06. The Nasdaq rose 21.5 points to 2,669.86.

The market has had a strong start to the year. The Dow is up almost 200 points, or 1.6 percent. The S&P 500 is up 1.9 percent. And the technology-focused Nasdaq is already up 2.5 percent.

Stocks spent the morning lower after Europe — which dominated so much of Wall Street’s hectic 2011 — became a concern again.

Trading in UniCredit, a large Italian bank, was halted after the stock lost a quarter of its value. The bank said Wednesday that it would need to offer huge discounts to investors to raise money.

And a financial crisis deepened in Hungary, which had to pay a staggeringly high interest rate of 10 percent on its 12-month debt. That is far above the 7 percent level that forced Greece and Portugal to seek bailouts.

Taken together, the news raised fears on Wall Street that Europe’s debt crisis would spread from small countries such as Greece and infect much larger ones such as Italy that are too big to be bailed out.

“The positives that are coming out of our economy are less significant than the fear that is coming out of Europe,” said Ralph Fogel, an investment strategist and partner at Fogel Neale Partners in New York.

Stocks fell more than 2 percent in Italy, Greece and Spain. Markets in the bigger, more stable economies of Britain and Germany fell slightly. The CAC-40 in France fell 1.5 percent.

The euro fell to just below $1.28, down more than a penny from Wednesday, to its lowest since September 2010. The euro spent most of last year, even the most uncertain days of the European debt crisis, above $1.30.

In the U.S., Barnes & Noble plunged 17 percent after lowering its profit forecast and saying it might spin off its Nook e-reader, which faces competition from the Amazon Kindle and the Apple iPad.

Other retailers fell, too, after their December sales failed to impress Wall Street.

Upscale stores did well, but others struggled. Macy’s beat expectations for sales and rose 1 percent. But Target, J.C. Penney Co. and Gap were all among the worst performers in the S&P 500, each down more than 2.7 percent.

The Labor Department reported another drop in the number of people filing for unemployment benefits, and ADP, which processes payroll data, said private employers added 325,000 jobs last month.

The reports signaled further, though not dramatic, improvement in the job market. The government reports Friday on how many jobs were created in December and on the unemployment rate, which stands at 8.6 percent.

In other U.S. corporate news:

• MetroPCS Communications Inc., the fifth-largest cellphone company in the U.S., fell 8.9 percent after reporting new subscriber growth that was lower than analysts had expected.

• Constellation Brands Inc., which makes Robert Mondavi wine and Svedka vodka, fell 3.5 percent after its quarterly profit dropped 25 percent. North American wine and beer sales were weaker.

• Tesoro Corp., a Texas oil refiner, plunged 5.9 percent. It said it lost money in the final three months of 2011 because the rising price of crude oil made refining more expensive at the same time gasoline prices were falling.

TORONTO (Reuters) – Toronto’s main stock index fell for a fourth straight session on Friday, extending its 2011 losses as lower commodity prices and a fire in the Alberta oil sands pulled down oil and other resource shares.

Oil company Canadian Natural Resources fell 5.47 percent to C$40.60 after a fire late on Thursday halted production at its 110,000-barrel-a-day oil sands project.

The energy group, which accounts for more than a quarter of the index, led declines, dropping 1.1 percent as U.S. crude oil futures ended the first week of the year with the biggest weekly percentage loss in nearly five months.

Suncor Energy, Canada’s biggest oil company, was off 0.43 percent at C$36.98.

The index’s materials group, home to gold miners, fell 0.64 percent. Goldcorp was down 1.02 percent at C$42.50, while Barrick Gold declined 0.77 percent to C$48.69.

Gold prices suffered their longest losing streak in seven months, sliding more than 3 percent this week and falling for a fifth day on Friday after U.S. December jobs data failed to spark safe-haven demand.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 39.37 points, or 0.3 percent, at 13,272.30. For the week, the index fell 1.27 percent.

“We’re under a little bit of pressure today, but I don’t think it’s anything disastrous,” said Fred Ketchen, director of equity trading at ScotiaMcLeod.

“In the U.S., significant disappointment continues to plague their economy…problems in the United States continue and we need to be aware of the fallout that will continue to come from our southern neighbors.”

Tempering the index’s losses was a 0.37 percent gain in financial issues, which got a lift from data that showed the Canadian economy created more jobs than expected in December.

Royal Bank of Canada was up 0.79 percent at C$52.02, while Bank of Nova Scotia gained 0.68 percent to close at C$56.25. Toronto Dominion Bank rose 0.51 percent to C$74.20

“There are a couple of factors that might be creeping in on the back of today’s data to impede gains in the short term: those would be the stronger loonie and concerns about potential rate hikes by the Bank of Canada in the months ahead,” said Elvis Picardo, analyst and strategist at Global Securities.

“You couple that with the fact that we’ve had an exceptional run since December and it’s not surprising to see a minor selloff.”

A Reuters poll on Friday showed most of Canada’s primary securities dealers expect the Bank of Canada to resume raising interest rates in the first half of this year.

In individual company news, pharmacy chain Jean Coutu Group, which reported a higher quarterly profit that topped expectations, fell 0.93 percent to C$9.57. The company said it will feel the first impact of Quebec’s drug sales reform initiatives this quarter.

(Reporting by Solarina Ho; editing by Peter Galloway)

NEW YORK (Reuters) – Stocks racked up a fourth straight week of gains on Thursday, as investors expected optimism about the economic recovery to support equities through year-end.

The S&P 500 ticked lower on Thursday, the close of a holiday-shortened week, breaking five days of gains, in the lowest volume in a full-day session this year. Banks dragged on the market, giving back recent gains after a strong month.

Some technical and sentiment indicators auger for a near-term drop in stocks, but investors remain optimistic over the long haul.

Keith Springer, president of Springer Financial Advisors in Sacramento, California, said the market is more likely to trade sideways than fall dramatically.

“A sideways move can work off an overbought condition,” said Springer. “Just the fact that it slows down and moves sideways is almost a corrective pattern for the stock market.”

Economic data was mixed. Consumer sentiment rose in December to its highest level since June, and demand for long-lasting manufactured goods surged. First-time claims for jobless benefits edged down, but a rise in new home sales in November came in below expectations.

The KBW Bank index (.BKX) eased 0.9 percent following a month-long rally that had boosted the index by 15.7 percent for December.

Bank of America Corp (BAC.N) lost 2.4 percent to $13.06 and JPMorgan Chase & Co (JPM.N) fell 0.2 percent to $42.00.

The Dow Jones industrial average (.DJI) added 14.00 points, or 0.12 percent, to 11,573.49. The Standard & Poor’s 500 Index (.SPX) edged down 2.07 points, or 0.16 percent, at 1,256.77. The Nasdaq Composite Index (.IXIC) eased 5.88 points, or 0.22 percent, to 2,665.60.

For the week, the S&P 500 was up 1 percent, the Dow gained 0.7 percent and the Nasdaq rose 0.9 percent. It was the fourth week of gains for the Dow and S&P and the fifth week of gains for the Nasdaq.

The latest American Association of Individual Investors’ survey found bullish sentiment rose 13.1 percentage points to 63.3 percent, as of December 23, a six-year high.

Volume was the lightest of the year with just 4.56 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq as Wall Street prepared for a break on Friday for the Christmas holiday.

Market watchers say the market is likely to see more upside in the remaining five trading days of the year after a 6.5 percent gain for the month put the S&P 500 up 12.7 percent for 2010.

According to Birinyi Associates Inc, the market rallies 73 percent of the time from the close before Christmas Day to the last close of the year for an average return of 1.34 percent.

Resource shares led the way up as the price of oil rose to a more than two-year high above $91 a barrel. Chevron Corp (CVX.N) rose 0.9 percent to $90.68.

Retail stocks got a boost as Bed Bath & Beyond Inc (BBBY.O) rose 5.1 percent to $50.10 after topping profit estimates and forecasting a strong holiday season.

Fabric and crafts retailer Jo-Ann Stores Inc (JAS.N) surged 31.9 percent to $60.19 after it agreed to a buyout by private equity firm Leonard Green & Partners for $61 per share.

The Morgan Stanley Retail index (.MVR) gained 0.5 percent.

Top U.S. memory chip maker Micron Technology Inc (MU.O) weighed on the Nasdaq. Its shares tumbled 4.1 percent to $7.94 after it forecast lower pricing for NAND chips, which are used in smartphones and tablet computers.

About 4.56 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s estimated daily average of 9.65 billion.

Declining stocks slightly outnumbered advancing ones on the NYSE by 1,529 to 1,422 , while on the Nasdaq, decliners beat advancers 1,478 to 1,173.

(Editing by Leslie Adler)

NEW YORK (Reuters) – U.S. stocks closed little changed on Friday, but Wall Street wrapped up its best month in a year after the earnings season rounded the final turn with a group of strong results that offset the impact of poor economic data.

While the major indexes each posted 7 percent gains for the month, it came during low volume and followed a combined decline of nearly 14 percent for May and June.

The conflict between strong earnings and lackluster economic news has held stocks in a tight range throughout July. Prior to Friday’s open, second-quarter GDP data disappointed investors, even though shares came back later in the session.

A lack of clear direction has led to more technical trading, with the S&P 500 finding support around 1,100 while struggling to move above its 200-day moving average around 1,115. A sustained move above that level would be bullish for investors.

“We have failed up here essentially about three times, so technically people are using that as something to lean on the short side,” said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global.

Kalivas said global purchasing managers’ indexes at the start of next week will give investors a better idea about the direction of the economy and could be a catalyst for markets.

“The market kind of stalled up the last couple of days. On the surface earnings numbers have been pretty strong, but underneath there was a loss of momentum,” he said.

Speculators are net short the S&P 500, according to Commodity Futures Trading Commission data but trimmed their short portions from a week earlier.

For July the Dow rose 7.1 percent, the S&P 500 gained 6.9 percent and the Nasdaq added 6.9 percent.

The Dow Jones industrial average (.DJI) dropped 1.22 points, or 0.01 percent, to 10,465.94. The Standard & Poor’s 500 Index (.SPX) gained 0.05 points, or 0.00 percent, to 1,101.58. The Nasdaq Composite Index (.IXIC) gained 3.01 points, or 0.13 percent, to 2,254.70.

For the week, the Dow rose 0.4 percent, the S&P 500 lost 0.1 percent and the Nasdaq dipped 0.7 percent.

In corporate news, Chevron Corp (CVX.N), the second-largest U.S. oil company, reported a three-fold jump in quarterly profit, topping Wall Street’s forecast, but its revenue was below analysts’ estimate. The shares rose 0.2 percent at $76.21.

U.S. drugmaker Merck & Co (MRK.N) reported a profit that beat analysts’ estimates, but its sales were less than Wall Street’s expectations, and the stock fell 1.7 percent to $34.46.

In the Commerce Department’s first estimate of economic growth for the second quarter, U.S. GDP expanded at a 2.4 percent annual rate, driven by capital investment, but the expansion was down from the first quarter’s revised 3.7 percent rise.

U.S. consumer sentiment plunged in July to its lowest level since November on bleak prospects for jobs and income a year since the economic recovery began, according to the Thomson Reuters/University of Michigan’s Surveys of Consumers.

The Institute for Supply Management-Chicago business barometer, however, showed businesses boosted employment and orders.

About 7.63 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, short of last year’s estimated daily average of 9.65 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 2, while on the Nasdaq, about five stocks rose for every four that fell.

(Reporting by Edward Krudy; Editing by Kenneth Barry)

NEW YORK (Reuters) –
Wall Street closed out its best week in a year on Friday, snapping back from a long stretch of selling, as investors looked ahead to what many expect will be a solid earnings season.

Stocks ended near the day’s highs, but trading was thin. Just 6.197 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, making it the lowest-volume day of the year.

Google Inc (GOOG.O) helped lift the Nasdaq, rising 2.4 percent to $467.46 after Beijing gave the company the green light to continue operating its China Internet search page. U.S.-listed shares of rival Baidu Inc (BIDU.O) fell 1.7 percent to $71.20.

The major stock indexes advanced 5 percent in the holiday-shortened week, as investors put a string of dismal data behind them to focus on what is expected to be another solid quarter for corporate results.

“We expect to see good margins, very healthy balance sheets

and companies basically saying that even with the slowdown, we are very well prepared for it,” said Marc Pado, U.S. strategist at Cantor Fitzgerald & Co. in San Francisco.

“We have been seeing from previous data that companies are not building inventory and not adding workers. In other words, they are very well positioned for the worst case scenario,” Pado said.

The Dow Jones industrial average (.DJI) was up 59.04 points, or 0.58 percent, at 10,198.03. The Standard & Poor’s 500 Index (.SPX) was up 7.70 points, or 0.72 percent, at 1,077.95. The Nasdaq Composite Index (.IXIC) was up 21.05 points, or 0.97 percent, at 2,196.45.

The earnings season unofficially begins with Alcoa Inc (AA.N) after the closing bell on Monday. Analysts are expecting overall second-quarter earnings to grow by 27 percent, according to Thomson Reuters data. This is up from the 22.4 percent that analysts were anticipating at the beginning of the year.

Alcoa, the first Dow component to report, is expected to swing to a second-quarter profit, though falling aluminum prices have prompted analysts to cut their estimates on the stock.

The S&P 500 rose for a fourth straight day, up 5.4 percent this week, its best week since mid-July 2009. But the index is still down about 11.7 percent from its most recent closing high in late April.

The Dow rose 5.3 percent and the Nasdaq advanced 5 percent this week.

Johnson & Johnson (JNJ.N) was the biggest drag on the Dow, falling 1.4 percent to $60.54 a day after it recalled more Tylenol and other over-the-counter drugs following consumer complaints of odors. The move expands a recall started in January.

In addition to Alcoa, companies reporting next week include JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and General Electric Co (GE.N).

Banks will be scrutinized by investors concerned about delinquencies and loan demand to gauge the sustainability of a recent improvement in credit quality.

In deal news, Air Products and Chemicals Inc (APD.N) late Thursday raised its hostile bid for rival Airgas Inc (ARG.N) by 5.8 percent to $5.3 billion, but the offer remained slightly below the company’s current market value.

Air Products rose 1.4 percent to $69.74, while Airgas rose 1.6 percent to $64.90.

In economic news, U.S. wholesale sales fell unexpectedly in May, lifting inventories to their highest level in 11 months, a government report showed. Analysts said a slackening in demand could lead businesses to try to curb the inventory buildup, weighing on economic growth.

Recent U.S. data showing slowing growth in the services and manufacturing sector, weakness in housing and a stagnating jobs market also worried investors, although most say it is too early to call a double-dip recession.

The day’s trading volume fell well below last year’s estimated daily average of 9.65 billion. Advancing stocks outnumbered declining ones on the NYSE by 2383 to 627 while on the Nasdaq, advancers beat decliners by 1979 to 642.

(Reporting by Angela Moon, Editing by Kenneth Barry)