NEW YORK (Reuters) – U.S. stocks are expected to end next year with modest gains, despite the threat of a global downturn brought on by the euro zone debt crisis and a tepid domestic economy that may still need more stimulus, a Reuters poll found.

Strategists polled had solid hopes for the U.S. economy and many cited historically low price-to-earnings ratios. But the euro zone crisis has battered stock markets this year and there was a wide range of views on where Wall Street is headed.

The Standard & Poor's 500 index (.SPX)(.INX) is expected to rise about 7.5 percent from Wednesday's close to 1,340 by the end of next year, according to a median forecast from over 40 respondents polled over the last week.

Forecasts range from a high of 1,550 to a low of 718, almost as low as the nadir of March 2009, when it touched 666. That 832-point spread was the widest in all of the quarterly Reuters polls since the financial crisis began in 2008.

But the benchmark index is expected to be about where it is now by mid-2012, following a tumultuous year that has it down a little under 1 percent since the close of 2010. Last year, it rose 12.8 percent.

Indeed, the S&P 500 has fallen in six of the past seven months, with many investors fearful of a hit to global growth if the crisis in Europe worsens or leads to euro zone breakup.

"The more Europe goes to the back burner, the more the market will rise," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

But that is a big if. Forecasts are decidedly less bullish than in the recent past, particularly for the big industrials. And U.S. economic growth is expected to be tepid next year at best, according to a recent Reuters poll.

The Dow Jones industrial average (.DJI) is expected to trade at 12,000 by the middle of next year, lower than Wednesday's close. It's expected to rise just 2.8 percent to 12,388 by the end of 2012.

Stocks have vacillated from despair to euphoria in the last two months, although most analysts generally agree that share prices are out of step with worries priced into government bonds.

Global indexes rallied on Wednesday after central banks around the world announced co-ordinated steps to prevent a credit crunch among banks in Europe struggling with the region's debt crisis.

The S&P surged to its best monthly performance in 20 years in October after euro zone leaders pushed for recapitalization of banks and to bolster the region's bailout fund.

Part of the reason for the tempered optimism is improving U.S. economic data, even though high unemployment persists and the housing market, ground zero of the financial crisis, remains in the doldrums.

Analysts also note that while U.S. companies may not be hiring much, they are sitting on huge piles of cash.

The S&P has a forward price-to-earnings ratio of 11.5, according to Thomson Reuters data. That compares with an average of 15 over the past decade.

"I've never seen the balance sheets of corporate America as strong as (they are) today," said Stanley Nabi, Vice Chairman at Silvercrest Asset Management Group in New York.

"The risk is not as high as people make it out to be."

(Reporting By Chuck Mikolajczak; Additional polling by Ashrith Doddi and Sumanta Dey; Editing by Jon Loades-Carter)

BANGKOK – Asian markets moved modestly higher Friday after news of a narrowing U.S. trade deficit sent Wall Street stocks up after a weeklong slump.

Oil prices rose above $102 per barrel, while the dollar slipped against the euro but gained against the yen.

Japan’s Nikkei 224 index rose 1.3 percent to 9,585.59. Vehicle makers, which depend heavily on U.S. demand, posted strong gains.

Toyota Motor Corp., the world’s No. 1 auto maker, rose 1.7 percent. Smaller rivals Honda Motor Co. gained 1.6 percent, while Nissan Motor Corp. was up 2.1 percent.

South Korea’s Kospi index slid 0.3 percent to 2,065.01 after the Bank of Korea raised its key interest rate for the fifth time in less than a year amid a bid to fight inflation.

The central bank lifted the benchmark base rate to 3.25 percent from 3 percent at a monthly monetary policy meeting.

The action dampened investment sentiment, because traders — believing that rate hikes discourage growth and hurt stock prices — often take fright. Hynix Semiconductor, one of the world’s largest memory chip makers, sank 4.7 percent. LG Electronics lost 2.6 percent.

Hong Kong’s Hang Seng was 0.8 percent down to 22,440.99 as banking shares dropped.

The Bank of China Ltd., one of the country’s four major state-owned commercial lenders, lost 0.5 percent. Agricultural Bank of China Ltd., the country’s biggest rural lender, lost 1.2 percent. Industrial and Commercial Bank of China, the world’s biggest bank by market value, was down 0.3 percent.

Australia’s ASX/S&P 200 rose 0.3 percent to 4,562.50. Benchmarks in Indonesia, the Philippines and New Zealand were also higher, while Singapore and Taiwan and mainland China fell.

On Wall Street, a report that U.S. exports hit a record in April sent stocks sharply higher Thursday as investors hoped the economic recovery may not be as sluggish as grim economic reports in the past week have suggested.

Stocks have been slipping since mid-April as investors become concerned that the U.S. economy has hit a soft patch. Rising oil prices, Japan’s tsunami and nuclear disaster and the risk that Greece might default on its debt have led investors to lower their forecasts for U.S. growth this year.

The Dow Jones industrial average rose 0.6 percent to close at 12,124.36. The Standard & Poor’s 500 index rose 0.7 percent to 1,289.00. The Nasdaq composite rose 0.4 percent to 2,684.87.

Thursday’s gains broke a six-day losing streak and marked the first time stocks rose in June. Stocks had dropped following poor reports on manufacturing, home sales, hiring and consumer confidence.

Benchmark crude for July delivery rose 11 cents to $103.04 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.19 to settle at $101.93 a barrel on Nymex on Thursday.

In currencies, the euro rose to $1.4537 from $1.4509 in late trading Thursday in New York. The dollar fell to 80.08 yen from 80.26 Japanese yen.

NEW YORK (Reuters) – Wall Street rose modestly on Tuesday, led by gains in the consumer discretionary sector after McDonald’s posted earnings above Wall Street’s estimates.

Stocks wavered between small gains and losses as energy shares weakened after China’s central bank raised interest rates to tackle inflation. But the market brushed off the news by midday and resumed the rally that has pushed the Dow and the S&P to their highest in 2 1/2 years.

Dow component McDonald’s Corp (MCD.N) posted stronger-than-expected global sales at established restaurants as demand in Europe rebounded. The stock rose 3 percent to $65.67.

“It would take something unforeseen to derail this rally, and China’s rate hike was something that investors were expecting. They are expecting that not only from China but from all over the world,” said Timothy Harder, chief in investment officer at Peak Investment Services is Denver, Colorado.

“The unwinding of pessimism is now slowly turning into optimism.”

The Dow Jones industrial average (.DJI) was up 35.57 points, or 0.29 percent, at 12,197.20. The Standard & Poor’s 500 Index (.SPX) was up 2.60 points, or 0.20 percent, at 1,321.65. The Nasdaq Composite Index (.IXIC) was up 1.50 points, or 0.05 percent, at 2,785.49.

The S&P consumer discretionary index (.GSPD) was up 0.6 percent and was the top performing among S&P 500 sectors.

Merger activity continued for a second day with Kindred Healthcare Inc’s (KND.N) planned acquisition of RehabCare Group Inc (RHB.N) to create a post-acute healthcare services company.

Kindred Healthcare jumped 23.6 percent to $24.08 and RehabCare soared 43.9 percent to $36.65.

But some earnings disappointed investors.

Teva Pharmaceutical Industries’ (TEVA.O) shares fell 6.4 percent to $51.50 after the world’s biggest maker of generic drugs reported results that fell short of forecasts.

Avon Products Inc (AVP.N) posted a steeper-than-expected drop in quarterly profit, pushing shares of the world’s largest direct seller of cosmetics down 5.2 percent to $27.83.

Beazer Homes USA (BZH.N) also reported a wider-than-expected first-quarter loss, sending the stock down 1.5 percent to $5.37.

In the latest move to battle inflation, China’s central bank raised interest rates by 25 basis points, its second increase in six weeks.

The S&P energy index (.GSPE) fell 0.6 percent to be the worst-performing sector on the index.

(Reporting by Angela Moon, Editing by Kenneth Barry)

DOW PULLS BACK: The Dow Jones Industrial average gained 39 Thursday, or 0.4 percent, after trading as much as 105 points higher earlier in the day.

BLUE CHIPS BEAT EARNINGS: Dow earnings components McDonald’s Corp., Travelers Cos. and Caterpillar Inc. all beat analyst expectations for third-quarter earnings.

MIXED LABOR NEWS: First-time claims for unemployment benefits fell last week, but the decline was offset by a sharp revision to the previous week’s claims. Claims remain stuck at levels that indicate companies are not making changes to their current workforce.

NEW YORK – Stocks finished with modest gains Thursday after pulling back from a rally that pushed share prices near their highest levels of the year.

All three major stock indexes finished higher after an up-and-down trading session. Stocks initially jumped as much as 1 percent following another round of earnings announcements, then traded briefly in the red in the afternoon before a final push higher.

After the market closed, Internet retailer Amazon.com Inc. reported that earned 51 cents per share in the third quarter, which was 3 cents higher than analysts were expecting. The company’s operating expenses were also 40 percent higher than this time last year, which helped push its shares down about 4 percent in after-market trading.

The Dow Jones industrial average rose 38.60, or 0.4 percent, to close at 11,146.57. It briefly eclipsed its highest closing level of 2010, which it reached on April 26.

The Standard & Poor’s 500 index rose 2.09, or 0.2 percent, to 1,180.26, while the Nasdaq rose 2.28, or 0.1 percent, to 2,459.67.

The Dow had been up as much as 105 points after three members of the index — Caterpillar Inc., Travelers Cos. and McDonald’s Corp. — all beat earnings expectations.

Traders were also looking at data that did not provide a clear outlook for the economy. First-time claims for unemployment benefits fell last week, but the decline was offset by a sharp upward revision to the previous week’s claims. Unemployment claims are stuck at levels that indicate companies are not still not hiring many workers.

The Chinese government, meanwhile, said that country’s economic growth slowed to 9.6 percent in the third quarter. China has been trying to slow its rapid growth to a more sustainable level that would keep inflation from getting out of control. However a slowdown in China could also effect on exports and sales to that country.

“It was a mixed day for earnings reports and economic data, and the stock market is reflecting that,” said Brad Sorensen, a director of sector research at Charles Schwab.

Bank of America Corp. again hurt the Dow as it continues to be dogged by worries about whether investors will force the bank to buy back mortgages it originated. Shares of the North Carolina bank were down 39 cents, or 3.3 percent. The company has fallen 13 percent this month.

Stocks of other big national banks were also mostly lower on the day.

Home Depot Inc., with a gain of 3.5 percent, was the top-performing stock in the Dow.

Caterpillar hit a high for the year early in the morning before pulling back. United Parcel Service Inc.’s profit jumped and the shipping company raised its outlook. But it too retreated after coming within $1 of hitting a new high for the year.

“We’ve had some better-than-expected earnings for the last few days, but I think what’s happening today is some natural volatitly as we get near the highs for the year,” said Thomas Villalta, a fund manager at Jones Villalta funds. Each major market index is up more than 3 percent for the month.

JetBlue Airways Corp. also reported strong earnings, only to see its stock approach its 2010 high and then fall. Shares of the company fell 33 cents on the day, or 4.7 percent, to finish at $6.62. Competitor Delta Air Lines Inc. saw its shares rise for the second straight day, finishing up 56 cents, or 4.3 percent, to $13.53 a share. The company’s stock is up nearly 20 percent for the week.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.54 percent from 2.48 percent late Wednesday.

The dollar rose 0.3 percent against a broad basket of currencies.

Consolidated trading on the New York Stock Exchange came to 4.5 billion shares.

BANGKOK – Asian stock markets mostly fell Tuesday but losses were limited amid easing worries over the pace of the global economic recovery.

Investors in the region were also waiting to see how U.S. markets react to President Barack Obama’s new jobs program announced Monday.

Obama wants to spend more than $50 billion to rebuild roads, railways and airport runways, hoping to create jobs and shore up the recovery in the world’s No. 1 economy. U.S. financial markets were closed Monday for the Labor Day holiday.

Japan’s benchmark Nikkei 225 stock index declined 77.58 points, or 0.8 percent, to 9,223.74 while Hong Kong’s Hang Seng index added less than 0.1 percent to 21,357.11.

South Korea’s Kospi edged lower by 0.1 percent to 1,793.66 and Australia’s S&P/ASX 200 was down 0.1 percent at 4,571.50

Among other weaker markets was the Shanghai Composite Index, which fell 0.4 percent to 2,686.27. Markets in Singapore and Malaysia also fell while India, Indonesia and Taiwan gained.

Asian and European stock markets ended higher Monday after better-than-expected U.S. jobs figures Friday helped ease fears that the global economy could slip back into recession.

In currencies, the dollar slipped to 84.10 yen in Tokyo from 84.11 yen in London. The euro declined to $1.2800 from $1.2833.

Benchmark crude for October delivery was down 65 cents at $73.95 a barrel in electronic trading on the New York Mercantile Exchange.

NEW YORK – Stocks ended a seesaw day with a modest gain Wednesday after investors found some pluses in retail earnings reports.

The Dow Jones industrial average and other major indexes fluctuated throughout the day before closing with slender gains. There was little news to motivate investors a day after a stream of improving economic numbers restored some of their enthusiasm for stocks and sent the Dow up 103 points. But retailers continued reporting second-quarter earnings and investors found a few positives.

Target Corp. missed analysts’ forecasts for its second quarter revenue and offered a muted outlook for sales for the rest of the year. But the company told analysts it hopes to offset weak sales with higher sales of groceries and its new discounts for credit card holders. Target initially fell sharply, then recovered to a healthy advance.

The reports came a day after Wal-Mart Stores Inc. and Home Depot Inc. issued numbers that were upbeat. Almost all the big retailers closed higher Wednesday. An exception was BJ’s Wholesale Club Inc., which lowered its earnings outlook for the year. Its stock dropped.

Wednesday’s trading was muted, and that was to be expected after Tuesday’s advance and as the outlook for the economy remained unclear. Traders weren’t about to commit much more money to stocks. And many traders weren’t at their desks.

“This is sort of a reflection of it being August when most trading firms have a skeleton staff on hand. It’s going to be quiet for the next week or two,” said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.

The Dow rose 9.69, or 0.1 percent, to 10,415.54. The Standard & Poor’s 500 index rose 1.62, or 0.2 percent, to 1,094.16. The Nasdaq composite index rose 6.26, or 0.3 percent, to 2,215.70

Gainers were ahead of losers by 3 to 2 on the New York Stock Exchange. Consolidated volume was again extremely light at 3.8 billion shares, down from Tuesday’s 4.1 billion.

Treasurys remained a destination for investors seeking a safer place than stocks to put their money. The 10-year Treasury yield fell to 2.63 percent from 2.64 percent late Tuesday.

John Stoltzfus, senior market strategist with Ticonderoga Securities in New York, said the market is becoming increasingly dominated by a “What have you done for me lately?” attitude and responding to daily reports about the economy.

“We live from economic data point to economic data point,” he said. “That will probably continue at least until the end of the summer as we wait for some kind of catalyst that would give the market better definition.”

BHP Billiton’s $38.5 billion takeover offer for fertilizer producer Potash Corp. of Saskatchewan turned hostile Wednesday. Potash had called BHP’s offer grossly inadequate. The announcement of the bid and Potash’s rejection Tuesday helped feed the rally in stocks. Mergers and acquisitions activity tends to lift the market because it shows investors’ confidence in the economy.

Investors were expecting a better offer. Potash rose $4.76, or 3.3 percent, to $147.93.

Target rose $1.27, or 2.5 percent, to $51.95. BJ’s fell $1.17, or 2.7 percent, to $42.14. J.C. Penney Co., hurt last week by a disappointing earnings report, rose along with its competitors. It closed up 52 cents, or 2.6 percent, at $20.66. Clothing retailer AnnTaylor Corp. rose 97 cents, or 6.5 percent, to $15.96.

Overseas, Japan’s Nikkei 225 index closed up 0.9 percent. In later European trading, London’s FT-SE 100 index fell 0.8 percent. Germany’s DAX index fell 0.3 percent, while the CAC-40 index in Paris fell 0.7 percent.

BANGKOK – Asian markets mostly posted tentative gains Tuesday as a steady drumbeat of bad news about the global economic recovery kept new bets to a minimum.

After Japan on Monday became the latest major economy to report slower growth in the second quarter, a regional manufacturing report in the U.S. further disappointed investors.

Oil prices, meanwhile, edged above $75 a barrel in Asia for the first time in five days but gains were tempered by uncertainty about the strength of demand for fuel in the second half of the year.

Investors have been unnerved by figures showing the U.S. economic recovery is stumbling while China, which helped lead the world out of last year’s recession, is also slowing as Beijing clamps down on credit to prevent overheating.

“The market has grown cautious as confidence in economic recovery waned. Nevertheless, an economic slowdown is unlikely to turn into a double dip recession,” Daewoo Securities said in a report.

Among advancers was China’s Shanghai Composite Index, which added 0.1 percent to 2,663.33 and South Korea’s Kospi, up 0.8 percent to 1,756.52.

Australia’s S&P/ASX 200 rose 0.9 percent to 4,481.80, reversing early losses. Volume was light ahead of national elections on Saturday. Markets in India, Taiwan, Malaysia and the Philippines also gained.

Sustained strength in the yen magnified lackluster sentiment in Japan, where the Nikkei 225 stock average fell 22.80 points, or 0.3 percent, to 9,173.87.

Japanese exporters, whose overseas earnings shrink when the yen climbs, came under selling pressure. Toyota Motor Corp. lost 0.7 percent, while camera maker Canon Inc. fell 0.4 percent.

Elsewhere, Hong Kong’s Hang Seng index was down 0.2 percent at 21,078.40 and Singapore’s benchmark lost 0.2 percent to 2,928.88. New Zealand’s market also fell.

In New York on Monday, the Dow fell 1.14, or 0.01 percent, to 10,302.01.

The Federal Reserve Bank of New York said manufacturing activity in the state rebounded slightly this month after falling sharply in July. Despite the modest gain, activity did not expand as much as expected, indicating tepid economic growth.

The Standard & Poor’s 500 index rose 0.13, or 0.01 percent, to 1,079.38, while the Nasdaq composite index rose 8.39, or 0.4 percent, to 2,181.87.

In currencies, the dollar rose to 85.30 yen from 85.15 yen late Monday. The euro climbed to $1.2862 from $1.2814.

Benchmark crude for September delivery was up 4 cents at $75.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 15 cents on Monday to settle at $75.24.

NEW YORK – Stocks fluctuated Monday as investors did a little buying after four days of heavy selling.

The Dow Jones industrial average erased its early losses and was up 11 points. Other major stock indexes rose slightly. Interest rates dropped as investors looking for safe investments bought U.S. Treasury notes and bonds.

The market initially pulled back after a regional manufacturing report fell short of forecasts and Japan became the latest country to show signs of slowing growth. Both reports raised investors’ concerns about the pace of the global economic recovery. Analysts said Monday’s trading was just a pause following four days of losses that sent the Dow down almost 400 points.

“The market is really being controlled by (short-term) traders,” said Mike Rubino, CEO at Rubino Financial Group in Troy, Mich. “The long-term investor doesn’t appear to be anywhere in sight.”

Without those long-term investors, trading is expected to remain erratic for the foreseeable future.

In midday trading, the Dow rose 10.82, or 0.1 percent, to 10,313.97. The Standard & Poor’s 500 index rose 1.50, or 0.1 percent, to 1,080.75, while the Nasdaq composite index rose 13.40, or 0.6 percent, to 2,186.88.

About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 288.5 million shares.

Investors continued buying Treasurys Monday, driving interest rates lower. U.S. government bonds are looking more and more appealing to investors wanting to find a safe place for their money as the economy cools and stocks drop.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.60 percent from 2.68 percent late Monday. Its yield is often used to help set interest rates on mortgages and consumer loans.

The yield on the 10-year note is near the level it last hit in March 2009 when stocks fell to a 12-year low.

Investors who are concerned about the U.S. economy got some bad news from overseas Monday. Japan said its economy grew just 0.1 percent in the second quarter, well below the 1.2 percent growth in the first quarter and short of expectations. The report follows signs last week that both the U.S. and Chinese economies are not growing as fast as earlier in the year.

Meanwhile, the Federal Reserve Bank of New York said manufacturing activity in the state rebounded slightly this month after falling sharply in July. Despite the modest gain, activity did not expand as much as had been forecast, which indicates that economic growth remains tepid.

The New York Fed’s Empire State Manufacturing Index rose to 7.1 in August from 5.1 in July. Economists polled by Thomson Reuters forecast the index would rise to 8. It was 19.6 just two months ago.

Regional manufacturing reports have shown a broad slowdown in recent months, a trend seen in other industries as well. It is particularly discouraging because manufacturing had provided the most consistent signs of growth during the first few months of the year.

The reports are the latest to indicate that the global economy is growing, but not as fast as it did during the first few months of the year. The slowdown has concerned traders who were predicting growth to pick up during the second half.

“We’re scared of our own shadows here,” said Jamie Cox, managing director at Harris Financial Group in Richmond, Va. “We need to readjust our signs from above-trend growth. If not, we’re going to be perennially disappointed.”

The news about the housing market was also discouraging. The National Association of Home Builders said its monthly index of builders’ sentiment fell in August for the third straight month.

Rubino said the weak housing market will force the government to keep interest rates low for a long time. That makes bonds an attractive investment right now because there is little fear that interest rates will climb. Higher rates eat into returns on bonds.

Lowe’s Cos. said Monday its quarterly profit and revenue rose, though both measures fell short of forecasts. The home-improvement retailer also lowered its full-year revenue forecast.

Shares of Lowe’s rose, climbing 40 cents, or 2 percent, to $19.99.

Overseas, Japan’s Nikkei stock average fell 0.6 percent. Britain’s FTSE 100 and Germany’s DAX index both rose less than 0.1 percent. France’s CAC-40 fell 0.4 percent.

NEW YORK – News that economic growth slowed during the spring gave the stock market a fitting end to a choppy July — yet another back-and-forth day.

The Dow Jones industrial average, down almost 120 points in the first minutes of trading, recovered and seesawed throughout the session. The Dow was up 17 in late afternoon. The other major indexes also rose modestly. Traders opted for the safety of Treasury bonds, and that sent interest rates lower.

But stocks were on track for their strongest month in a year. The Dow was up 7.1 percent going into Friday’s trading.

The Commerce Department said the gross domestic product, the broadest measure of the economy, grew at an annual pace of 2.4 percent from April to June. That’s less than the 2.5 percent economists polled by Thomson Reuters had forecast.

At first the report confirmed investors’ belief that the recovery is weakening as unemployment remains high and government stimulus programs end. Consumers cut back on their spending because of job worries and companies spent less to rebuild inventories.

But analysts said that as investors read deeper into the report, it didn’t look as bad as they initially thought. They found some good news in consumers’ savings rate.

“The consumer actually decided to save more,” Jason Pride, director of investment strategy at Glenmeade, an investment management company. “Consumers have done more to repair their balance sheets than thought.”

Pride said that means that those extra savings will eventually be spent, giving the economy a lift. Consumer spending accounts for the bulk of economic activity.

Business spending on equipment and software jumped in the second quarter by the biggest amount in 13 years. That was encouraging, analysts said, because it means companies are eventually going to start adding jobs.

“Companies are spending and eventually it will turn into employment,” said Ron Weiner, president and CEO at RDM Financial Group.

It wasn’t surprising that stocks gave up their gains and turned lower. Trading has been erratic as weak economic numbers have conflicted with companies’ generally good second-quarter earnings and forecasts for the rest of the year. Investors have been quick to cash in their gains because they don’t have a sense of where the market is headed.

In afternoon trading, the Dow Jones industrial average rose 17.48, or 0.2 percent, to 10,484.64. The Standard & Poor’s 500 index rose 3.34, or 0.3 percent, to 1,104.87, while the Nasdaq composite index rose 9.09, or 0.4 percent, to 2,260.78.

Rising stocks outpaced losers by about 2 to 1 on the New York Stock Exchange where volume came to 745 million shares.

Volume was extremely light even for a summer day. That continued a trend that has been seen for much of July. Analysts say many investors, uncertain about the where the market is heading, are staying on the sidelines or moving money into safer alternatives.

That strategy sent Treasurys higher Friday. The yield on the 10-year Treasury note, which moves opposite its prices, fell to 2.91 percent from 2.99 percent. Its yield is often used as a benchmark for interest rates on mortgages and other consumer loans. A yield below 3 percent suggests investors are worried about long-term growth and don’t fear inflation will be a problem anytime soon. Inflation is a threat to the long-term value of bonds.

Investors got some mildly good news from two other economic reports. The University of Michigan/Reuters consumer sentiment index for July rose slightly more than expected to 67.8 from a preliminary reading of 66.5. Economists expected it to rise to 67.

And the Chicago Purchasing Managers Index, which measures manufacturing activity in the Midwest, rose unexpectedly to 62.3 this month from 59.1 in June. Economists were expecting a drop to 56.5. The report is seen as an indicator of how the Institute for Supply Management’s nationwide index is likely to come in when it’s released on Monday.

Traders were also being cautious because they’re waiting for a series of key reports next week that will give a first look at how the economy is doing in the current quarter. The Institute for Supply Management releases its reports on the manufacturing and services sectors during July and the Labor Department issues its report on employment for this month.

Economists predict the two ISM reports will show manufacturing and the services industry expanded in July but at a slower pace than in June.

Meanwhile, the unemployment rate likely inched higher to 9.6 percent in July from 9.5 percent in June as the government laid off more temporary census workers. Private employers likely added 90,000 jobs during the month, slightly better than in June.

Overseas markets mostly fell Friday after reports that Spain’s credit rating is likely to be cut by Moody’s Investors Service. The potential downgrade comes as the country’s unemployment rate jumped to a 13-year high of 20.09 percent and the government continues to grapple with rising debt problems.

Spain’s IBEX 35 fell 1.2 percent. Britain’s FTSE 100 fell 1.1 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 fell 0.2 percent. Japan’s Nikkei stock average fell 1.6 percent.