BEIJING (Reuters) – China’s exports and imports grew at their slowest pace in more than two years in December as foreign and domestic demand ebbed, data showed on Tuesday, bolstering expectations of more policy action from Beijing to support the world’s number two economy.
Annual export growth of 13.4 percent in December was in line with expectations, albeit the slowest since November 2009 except for a February distortion caused by Lunar New Year holidays.
But it was a big downside surprise for import growth that caught investor attention, sinking to a 26-month low of just 11.8 percent year-on-year versus the 17 percent forecast by economists in the benchmark Reuters poll.
“We thought imports would surprise quite a bit on the downside and generally the implication is negative. Domestic demand is slowing down very quickly,” Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters.
Zhang said the scale of drops in annual import growth for domestic consumption, at 13.5 percent in December versus November’s 27.4 percent, and imports for processing trade at 6.2 percent versus about 11 percent in November, were crucial.
“That means going forward for the next couple of months exports will decline with a very high certainty,” he said. “This trade data basically confirms our view that the first quarter is going to be very tough.”
The December trade data is a key link in a series of activity indicators to be published by China over the next two weeks, including fourth-quarter gross domestic product that is likely to show the world’s second-largest economy suffering its worst quarter in 2- years.
Financial markets took the data in their stride, with hopes that it will prompt a relaxation of monetary policy offsetting fears over slowing growth.
Gains in Chinese stocks accelerated modestly after the data, with Shanghai’s main index up around 1.6 percent by 0515 GMT, broadly in line with other Asian markets outside Japan, while the yuan strengthened to 6.3122 per dollar.
TRADE SURPLUS
Despite easing growth rates, the total value of China’s imports and exports finished 2011 at an all-time high of $3.6 trillion. But the overall trade surplus shrank to a three-year low of $155 billion from 2010’s $183.1 billion.
The narrowing trade surplus for the year may help China argue that it is reforming its currency policy, countering foreign critics who accuse it of holding the yuan artificially low to give its exporters an unfair competitive edge.
But the pace of slackening trade is disconcerting for Beijing as exporters are mainstay employers in China, even though their output accounted for only around 7 percent of China’s 2010 GDP.
The softening domestic demand revealed by the data also complicates plans by China’s ruling Communist Party to rebalance the economy towards more internal demand and consumer imports and tilt it further away from exports.
“The main disappointment is with imports, which show a much weaker number compared to November and are way below consensus,” said Kevin Lai, an economist at Daiwa Capital Markets, in Hong Kong. “That means the boost in November was temporary, the domestic economy is slowing sharply. China will have to continue to relax policy to protect domestic demand.”
POLICY FINE-TUNING AHEAD
To counter patchy demand in the United States and Europe, China’s top two export markets, Beijing cut banks’ reserve requirements by 50 basis points in November to 21 percent, the first such cut in three years to boost corporate credit lines.
Economists see more cuts to required reserve ratios (RRR) coming, further tweaks to fiscal policy and quite possibly intervention to slow the steady appreciation of the yuan, which gained about 4.5 percent against the dollar in 2011.
“I think the authorities will intensify the fine-tuning. I think we will get an RRR cut pretty quickly, and I think the slowdown in the pace of RMB (yuan) appreciation will continue,” Tim Condon, head of Asian economic research at ING in Singapore, said.
M2 money supply data published on Sunday showed money growth hitting a four-month high in December, suggesting Beijing is adding cash to the financial system to ease credit strains and stimulate the economy.
Economists see slowing trade and tight domestic credit conditions dragging China into its worst quarter in 2- years between October and December, with GDP growth easing to 8.7 percent, down a full percentage point from the first quarter.
A Reuters poll in December showed analysts thought China could lower banks’ reserve requirements by another 200 basis points in 2012, but that a cut in interest rates was only likely if economic growth slips below 8 percent.
Many economists believe China needs to grow its economy by about 8 percent, at least, if it wishes to create enough jobs to sustain current employment rates.
China does not release any reliable jobs data, and its only measure of unemployment is an urban jobless rate that has hovered between 4.1 and 4.3 percent since June 2009.
The thing economists are sure about is that, even allowing for seasonal factors that could smooth some of the more disturbing trade numbers — an earlier than usual Lunar New Year in 2012 and reasonably steady exports — China faces serious economic headwinds in the months ahead.
“Half of China’s export markets are slowing in the first half of the year so that’s why expectations for growth remain downbeat,” said Li Wei, an economist at Standard Chartered, in Shanghai.
“It’s not the end of the slowing down part of the story. That will probably last another quarter or four or five months before momentum recovers along with other emerging markets.”
(Additional reporting by Beijing Economics Team; Writing by Nick Edwards; Editing by Alex Richardson)

LA Times – As the first former U.S. senator to be subpoenaed by Congress in more than a century, Jon Corzine testified Thursday about the “last chaotic days” of MF Global, the trading firm that declared bankruptcy under his watch.

Corzine said he was “stunned” to learn that the firm could not locate hundreds of millions of dollars in client money in the days before the firm’s collapse, and said he had no idea where the money had gone.

Corzine was chief executive of MF Global when the firm filed for bankruptcy protection Oct. 31. He resigned from his post five days later.

“I simply do not know where the money is or why the accounts have not been reconciled to date,” he said in testimony before the House Agriculture Committee.

Client money should have been held in segregated accounts separate from those involving the firms’ own trading activity. The disappearance of the money has led to speculation that MF Global used customer funds to shore up risky bets on European sovereign debt.

“I never intended to break any rules,” Corzine said when asked whether he had ever authorized a transfer of customer funds from segregated accounts.

“There were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global,” Corzine said.

Corzine said he “strongly advocated” the trading strategy that led MF Global to accumulate more than $6 billion in holdings in European sovereign debt. But he said the company’s sovereign debt positions were not the cause of the firm’s collapse.

The sovereign debt was “a concern to the marketplace, make no mistake about that,” Corzine said. But he said customers’ confidence in the firm also was rattled by ratings downgrades and a failure on the part of MF Global management to communicate the reasons for the company’s struggles.

“It often got conflated with Euro-sovereign positions, which there actually were no losses in,” he said.

RELATED:

MF Global trustee says $1.2 billion or more missing

Jon Corzine caught up as MF Global inquiries escalate

MF Global goes bankrupt, undone by Europe’s financial crisis

– Kim Geiger

Photo: Former MF Global Chief Executive Jon Corzine is sworn in before House Agriculture Committee. Credit: Jonathan Ernst / Reuters

AP – NEW YORK (AP) – Europe’s spreading debt woes and slower manufacturing in China pushed stocks sharply lower Wednesday. The Dow Jones industrial average fell 207 points in afternoon trading.

By Richard Drew, AP
Traders work on the floor of the New York Stock Exchange.
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By Richard Drew, AP
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Traders worldwide were spooked by an auction of German debt that drew too few bids to sell all of the 10-year notes being offered. Germany has Europe’s strongest economy, and traders have bought its debt as a safe place to store value during turbulent times.
The weak buying suggests that Europe’s crisis might be infecting strong nations crucial to keeping the euro currency afloat. Germany bears much of the burden of bailing out weaker and smaller neighbors, such as Greece and Portugal.
And borrowing costs for Italy and Spain rose from levels that already were considered dangerously high. Europe lacks the resources to bail out those countries, which have its third- and fourth-biggest economies.
The Dow fell 207 points, or 2.5%, to 11,286 as of 2:40 p.m. Eastern time. The Dow has now given back more than half of its big October rally. It jumped 9.4 percent in October, the biggest monthly gain since 2002.
The Standard & Poor’s 500 index fell 23 points, or 1.9%, to 1,165. All 10 industry groups fell sharply, led by energy companies and materials makers. The index is headed for its sixth straight decline, the longest losing streak since August.
The Nasdaq composite index lost 54, or 2.2%, to 2,467.
The dollar rose sharply against the euro as investors moved money into assets considered to be relatively safe. The euro fell below $1.34, from $1.35 late Tuesday.
Fears about Europe also dragged U.S. bank stocks lower. Investors were unnerved by the Federal Reserve’s announcement late Tuesday of a fresh round of stress tests of the biggest banks, said Peter Tchir, who runs the hedge fund TF Market Advisors.
The Fed said 31 banks will be tested to see how they would withstand a recession that would push unemployment above 13% by early 2013. The jobless rate now stands at about 9%.
Even though the stress tests had been planned months ago, the announcement undermined weeks of market-boosting talk by Fed officials, Tchir said. And the results of the stress tests underscored a darker view of the market held by some central bank officials, he added.
“They went ahead and put weakness into the market for the first time” in months, Tchir said. “No one was that afraid, and now all of a sudden, they’re saying ‘Our own Fed is worried.’ That really spooked people.”
Asian markets fell earlier after a survey showed that manufacturing appears to be slowing in China. A day earlier, the U.S. government had lowered its own estimate of third-quarter economic growth.
Relatively few shares were traded as many U.S. market participants got an early start on Thursday’s Thanksgiving holiday. U.S. markets will be closed Thursday and will have shortened hours on Friday.
In corporate news, equipment maker Deere (DE) shares rose 3% after the company reported net income growth of 46%. Deere credited strong sales of farm equipment.
Groupon (GRPN) plunged 14% to $17.22, trading below its Nov. 4 initial price of $20 for the first time. The online deals company went public less than three weeks ago.
The U.S. government released a mixed batch of economic reports before the market opened. But concerns about developments abroad, especially in Europe, overshadowed a handful of hopeful signals in those reports.
Slightly more people applied for unemployment benefits last week, a sign that layoffs continue. However, the broader trend is positive. The four-week average fell for the eighth time in nine weeks.
Consumer spending grew by the least in four months. Yet incomes rose a bit more than expected.
Orders for long-lasting manufactured products fell for a second month and business investment dropped off. But without commercial aircraft orders, a volatile category, orders actually increased.

Fox News – The markets fell sharply on Monday, but recovered from much heavier losses, as traders fretted over the debt crisis on both sides of the Atlantic.
Today’s Markets
As of 3:30 p.m. ET, the Dow Jones Industrial Average slid 214 points, or 1.8%, to 11,584, the S&P 500 fell 18.8 points, or 1.5%, to 1,197 and the Nasdaq Composite dropped 39.7 points, or 1.5%, to 2,534.
After weeks of headlines on Europe’s debt debacle driving global equity markets, Wall Street’s attention has once again shifted to Washington.
Volatility rose 2.4% on Monday, while U.S. Treasury yields slumped as traders raced out of equity markets. The benchmark 10-year note yields 1.971% from 2.012%.
The S&P 500, which is closely watched by market participants, sunk under the 1,200 mark for the first time since October and fell beneath an important technical resistance point. Meanwhile, all 30 components on the Dow were in negative territory.
In a sign of the breadth of the selling on Wall Street, roughly nine out of ten shares traded on the New York Stock Exchange were in declining issues.
Déjà Vu: Debt Panel Deadlocked
A congressional Super Committee tasked with crafting a bi-partisan solution to tackle the nation’s mounting debt burden appeared stuck at a stalemate with the deadline looming just days away. The 12-member panel was mandated to craft the legislation as part a last-minute agreement over the summer to raise the nation’s debt ceiling, staving off what could have been a costly default of American debt.
A failure of the committee to enact the legislation will trigger $1.2 trillion in Federal spending cuts that mostly take effect in 2013. Economists say these cuts may be a substantial drag on the world’s biggest economy starting in that year, but the more immediate concern may be to already jittery global financial markets that fear the political gridlock will prompt another downgrade of American debt. Standard & Poor’s cut the country’s top-notch rating over the summer, sparking a powerful, global rout.
Analysts at Nomura warned clients in a note on Monday that the markets’ reaction this time around may be “difficult to predict,” noting that a “complete failure” may not be priced in, an indication that markets across the world could be in for more selling if the effort totally collapses.
Market participants are focused on the “stalemate,” David Jones, chief market strategist at IG Index wrote in an e-mail.
Wall Street posted its worst weekly performance in nearly two months last week, with the Dow shedding close to 3%, and the broader S&P 500 and Nasdaq tumbling nearly 4%.
Market participants were also grappling with continued uncertainty on Europe’s debt crisis. Moody’s warned on Monday that climbing debt yields and a dimming economic picture could be negative for its outlook on French debt. France is the euro zone’s second-biggest economy and one of the currency bloc’s six triple-A rated nations.
Credit Suisse also issued a note to clients saying the currency bloc has entered its “last days” as we know it, adding the European Union will likely need to take “extraordinary” measures by early next year to keep the crisis from imperiling even the continent’s strongest banks.
The European Council is set to unveil a proposal for so-called euro bonds, which would be joint euro zone debt issuance, according to a report by The Wall Street Journal. Germany, the bloc’s economic powerhouse, has repeatedly rebuked such plans that are highly unpopular from a political perspective in that country. The EC’s plan is yet another sign that Europe is struggling to contain its crisis that started in its debt-laden periphery from striking at its core.
European blue chips plunged 3.2%, while the euro rose 0.02% to $1.351.
Wall Street Shrugs Off Upbeat Data
Existing home sales unexpectedly climbed in October from the month prior. The National Association of Realtors said sales of previously-occupied, single-family homes jumped 1.4% to an annualized unit rate of 4.97 million, topping expectations of a 2.2% decrease. Stocks were little changed on the report.
The housing industry has been hit hard by a high supply of houses on the market, stubbornly-low prices and still-tight lending conditions.
Energy markets were mixed despite big losses in equity markets. The benchmark crude oil contract traded in New York slid $1.41, or 1.4%, to $97.41 a barrel. Wholesale RBOB gasoline fell 1 cent, or 0.43%, to $2.49 a gallon.
In metals, gold dropped $46.50, or 2.7%, to $1,679 a troy ounce.
Corporate News
Gilead Sciences (GILD: 36.00, -3.88, -9.73%) revealed plans to acquire Pharmasset (VRUS: 134.19, +61.52, +84.66%) in a deal valued at $10.4 billion. Gilead’s $137 a share offer represents an 89% premium to the viral-drug maker’s closing price on Friday.
Alleghany (Y: 293.08, -21.18, -6.74%) is buying Transatlantic Holdings (TRH: 55.00, +0.57, +1.05%) for $3.4 billion in cash and stock.
Foreign Markets
European blue chips plunged 3.2%, the English FTSE 100 fell 2.4% to 5,233, and the German DAX slid 3.2% to 5,505.
In Asia, the Japanese Nikkei 225 dipped 0.32% to 8,348 and the Chinese Hang Seng slid 1.4% to 18,226.

Read more: http://www.foxbusiness.com/markets/2011/11/21/global-debt-woes-slam-wall-street/#ixzz1eNMcUZ6X

NEW YORK (Reuters) – Wall Street stocks rose slightly on Tuesday but lingering risk aversion tied to Europe’s debt crisis sent Italy’s bond yields back into a perceived danger zone, capping gains.
Italy’s prime minister-designate raced to assemble a new government so he could speed up reforms and reverse a collapse in market confidence. The yield on Italy’s 10-year benchmark bonds leaped above 7 percent, pushing government borrowing costs to a level widely seen as unsustainable.
Shares of U.S. banks, which are sensitive to flare-ups in Europe’s debt crisis, were weak early. Citigroup Inc (NYSE:C) fell 1.7 percent to $27.88.
A silver lining came in the form of stronger-than-expected retail sales in October and a report showing the New York manufacturing sector rose in November, ending five straight months of contraction.
But Doug Roberts, chief investment strategist at Channel Capital Research.com in Shrewsbury, New Jersey, said while the data were “OK but are not resounding,” investors were still focused on Europe.
“It is what I call the elephant in the room,” he said. “What people are thinking about more than anything is what could trigger a major recession and dislocation, and that’s really Europe.”
The Dow Jones industrial average (DJI:^DJI) rose 12.64 points, or 0.10 percent, at 12,091.62. The Standard & Poor’s 500 Index (SNP:^GSPC) was up 2.01 points, or 0.16 percent, at 1,253.79. The Nasdaq Composite Index (Nasdaq:^IXIC) put on 6.65 points, or 0.25 percent, at 2,663.87.
When Italian bond yields rose above 7 percent last week, the S&P 500 fell nearly 4 percent in one day. Heightened volatility has marked U.S. equities trading recently as investors fret about the debt crisis.
In the latest earnings reports, Wal-Mart Stores Inc’s (NYSE:WMT) quarterly profit missed expectations as the economy continues to weigh on customers at its U.S. unit, its largest division. Its shares dropped 1.8 percent to $57.81.
Home Depot Inc (NYSE:HD) raised its fiscal-year outlook for the third time in six months as efforts to improve distribution and boost customer service helped the No. 1 home improvement chain gain share from archrival Lowe’s Cos Inc (NYSE:LOW). Home Depot rose 0.6 percent to $38.47.

FOX BUSINESS NEWS – As of 12:30 p.m. ET, the Dow Jones Industrial Average fell 96 points, or 0.8%, to 12,056, the S&P 500 slid 14.4 points, or 1.1%, to 1,249 and the Nasdaq Composite dipped 24.2 points, or 0.9%, to 2,655.
Market participants have been fixated on Europe for weeks as single headlines have caused triple-digit spikes and plunges on the Dow repeatedly. Last week, a late-week rally offset a powerful selloff, knocking the broad S&P 500 and Nasdaq indices into the green for the year, joining the blue chips, which were already in positive territory.
In a sign of the continued jitters, the cost to insure euro zone sovereign debt increased on Monday, with insurance on Belgian and French debt hitting record highs. European blue chips sunk 1.6%, while the euro plummeted 1.4% to $1.362. U.S. Treasury yields, meanwhile, pointed modestly higher. The 10-year note yields 2.075% from 2.057%.
Financial and energy stocks took the brunt of the selling, while industrials and technology shares held up the strongest. Boeing (BA: 68.33, +1.41, +2.11%) was by far the best-performing Dow component after unveiling an $18 billion deal to sell 50 of its 777-300ER aircraft to Emirates air — the blue chip’s largest sale.
An auction of Italian bonds held early Monday showed investors remained skittish. The $4 billion swath of 5-year notes was sold at a yield of 6.29% — the highest in 14 years. Still, investors demanded 1.47 times the amount of bonds offered, that compares to a weaker 1.34 times in the previous auction.
The higher the yield the country pays, the more expensive it becomes for it to refinance the billions of euros in debt it needs to refinance this year, and the greater the chances it will need a rescue like Greece, Portugal and Ireland.
Europe Breaths a ‘Sigh of Relief’
It remains clear that the situation on the other side of the Atlantic still isn’t solved, but there were positive political developments over the weekend, analysts say.
“Europe breathed a sigh of relief over the weekend,” analysts at Nomura wrote in a note to clients on Monday.
Italy’s lower house of Parliament passed a critical budget-reform bill on Saturday that paved the way for its scandal-ridden premier Silvio Berlusconi to resign. Former European Union Competition Commissioner Mario Monti was tapped to run an emergency unity government that will seek to cut the euro zone’s third-biggest economy’s $2.6 trillion in public debt, and, perhaps more importantly, restore market credibility in the country.
Traders will still be paying attention to Greece, a much smaller economy, where newly-minted Prime Minister Lucas Papademos was working to forge a government to ensure the country does what is necessary to receive rescue aid it needs to avert a default. However, the leader of the New Democracy conservative party, Antonis Samaras, said Monday his coalition would not support new austerity measures demanded by international lenders.
Energy markets were broadly to the downside as the dollar jumped 0.62% against a basket of six world currencies . The benchmark crude oil contract traded in New York fell 97 cents, or 0.98%, to $98.01 a barrel. Wholesale RBOB gasoline fell 6 cents, or 2.3%, to $2.54 a gallon.
In metals, gold dropped $9.50, or 0.53%, to $1,779 a troy ounce.
Corporate News
Berkshire Hathaway has acquired a 5.5% stake in IBM (IBM: 187.55, +0.17, +0.09%) for $10.7 billion, the firm’s biggest investment in a technology company to date.
Lowe’s (LOW: 23.39, +0.28, +1.21%) posted quarterly results that topped Wall Street’s forecast on both the top and bottom line.
Foreign Markets
European blue chips sunk 1.6%, the English FTSE 100 fell 0.47% to 5,519 and the German DAX slid 1.2% to 5,985.
In Asia, the Japanese Nikkei 225 jumped 1.1% to 8,604 and the Chinese Hang Seng soared 1.9% to 19,508.

Read more: http://www.foxbusiness.com/investing/2011/11/14/european-debt-woes-weigh-on-stocks/#ixzz1dhsrpZpx

Reuters – Stocks fell on Monday as investors stayed focused on Europe, this time on the political turmoil in debt-burdened Italy, as a reason to sell risky assets.

Italian Prime Minister Silvio Berlusconi defied pressure to resign as he struggled to hold a crumbling center-right coalition, with markets on edge before a key parliamentary vote on budget reforms.

Adding to the uncertainty, Greece’s outgoing Socialist prime minister and conservative opposition leader raced to forge a coalition government and implement a new bailout program.

Today’s market is “solely driven by whether Italy’s Berlusconi will resign or not,” said Peter Boockvar, equity strategist at Miller Tabak + Co in New York. “We will thus have another week of markets being driven by politicians.”

The Dow Jones industrial average was down 86.09 points, or 0.72 percent, at 11,897.15. The Standard & Poor’s 500 Index was down 10.04 points, or 0.80 percent, at 1,243.19. The Nasdaq Composite Index was down 30.78 points, or 1.15 percent, at 2,655.37.

Equities have been very sensitive to headlines from Europe, especially with a light U.S. economic calendar this week and as earnings season winding down.

Financials and industrial stocks were the biggest decliners, with the S&P financial sector off 1.1 percent and the capital goods group off 1.5 percent. Bank of America Corp lost 2.6 percent to $6.32, near its 52-week low.

Warren Buffett’s conglomerate, Berkshire Hathaway Inc, reported a smaller third-quarter profit late Friday after losing more than $2 billion on derivatives related to stock market performance. The Class B shares fell 1.4 percent to $76.13.

Consumer electronics chain Best Buy Co Inc lost 3.3 percent to $26.40 after the consumer electronics chain said it was buying British partner Carphone Warehouse Group Plc for $1.3 billion and scrapping plans for a chain of European megastores.

About 3.15 billion shares traded so far on the New York Stock Exchange, the American Stock Exchange and Nasdaq, slightly below average.

On the NYSE, decliners beat advancers by a ratio of 2-to-1, while on the Nasdaq, the ratio stood at 3-to-1.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

NEW YORK (Reuters) – Stocks retreated on Friday after two days of gains as wealthier nations appeared to pull back from a European Union plan to broaden funding for a plan to deal with the region’s sovereign debt crisis.
German Chancellor Angela Merkel said hardly any countries in the Group of 20 industrialized nations are willing to participate in the euro zone bailout fund, throwing cold water on plans to stabilize Europe’s sovereign debt crisis.
Labor Department data showed U.S. hiring slowed in October but the unemployment rate hit a six-month low and job gains in the prior two months were stronger than previously thought, pointing to some improvement in the still-weak labor market.
“Point one right now is clearly the Greek situation because that thing has got to be resolved very soon or else there will be issues that we are not going to care to address,” said Cummins Catherwood, managing director at Boenning and Scattergood in West Conshohocken, Pennsylvania.
“We are all absolutely transfixed by this and it has overcome the jobs report today, which was mildly encouraging but again nothing to write home about.”
The PHLX Europe sector index, which includes major European shares, dropped 2.9 percent.
Financial shares also slumped, with the KBW capital markets index down 2 percent.
Shares of Jefferies Group Inc lost 4.9 percent after brokerage Keefe, Bruyette & Woods cut Jefferies target price but said the investment bank is being “unjustly punished” over perceived exposure to the European debt crisis.
The focus on developments from Europe has kept stock trading volatile, with the S&P 500 index swinging more than 1.5 percent every day this week. The index is on track to post its first negative week in five after closing on Monday with its best month in 20 years.
The Dow Jones industrial average dropped 141.56 points, or 1.18 percent, to 11,902.91. The Standard & Poor’s 500 Index fell 14.57 points, or 1.16 percent, to 1,246.58. The Nasdaq Composite Index declined 21.18 points, or 0.79 percent, to 2,676.79.
In a move to make its deficit targets credible, Italy agreed to have the International Monetary Fund monitor the country’s progress with long delayed reforms of pensions, labor markets and privatization. Italy’s debt burden could be the market’s next target after a resolution of Greece’s finances.
Shares of daily deals site Groupon Inc rose more than 50 percent in their stock market debut, but at least some of the early trading exuberance may have come from limiting the fraction of the company that was sold.
(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

NEW YORK (Dow Jones)–U.S. stocks traded slightly lower Friday as investors took a step back following the previous session’s big rally.

The Dow Jones Industrial Average edged down 9 points, or 0.1%, to 12199, bouncing between positive and negative territory through much of the trading day. On Thursday, the blue-chip index jumped 339.51 points as investors cheered a European plan to combat Greece’s debt woes, expand a bailout facility and recapitalize the region’s biggest banks.

The Standard & Poor’s 500-stock index was off 3 points, or 0.3%, to 1280. Consumer-discretionary and utility stocks led the index lower, while health-care and material stocks rose. The technology-heavy Nasdaq Composite fell 11 points, or 0.4%, to 2728.

“This is just a pause after a pretty big surprise yesterday,” said Michael Sansoterra, portfolio manager of the RidgeWorth Large Cap Growth Fund. “Folks are by and large a little less pessimistic. The reality is yesterday’s plan is a positive step in the right direction, but there’s still a lot of heavy lifting to do.”

Questions still remain regarding how Europe will implement its bold plans and whether they will be enough to resolve the Continent’s debt crisis.

“People are wondering if it’s safe to go back into the water,” said John De Clue, senior vice president at U.S. Bank Wealth Management. “Everyone applauds leaders in Europe for taking some steps forward, but we’ve been down this road before and there still aren’t a lot of details released yet.”

The Dow is up about 12% in October, on track for its biggest monthly percentage gain since 1987.

Friday’s early losses came after Americans boosted their spending last month even as wages barely inched higher, according to the Commerce Department. Consumer spending rose by 0.6% in September, matching economists’ expectations. That followed a 0.2% rise in August. Income, meanwhile, was up 0.1% last month, following a 0.1% fall in August.

Additionally, U.S. consumers turned less pessimistic at the end of October. The Thomson Reuters/University of Michigan consumer sentiment index rose to 60.9 from a 57.5 reading earlier in the month. The latest reading was better than the 58.5 economists were expecting.

“It’s not surprising everyone’s taking a deep breath,” said Nate Snyder, portfolio manager at Snow Capital Management. “The consensus had been Armageddon out of Europe and the U.S would go into a recession. We at least got rid of the Armageddon situation and the U.S. economic data isn’t pointing to a recession.”

In overseas markets, Europe erased earlier gains to trade slightly lower. The Stoxx Europe 600 slipped 0.2%, after being up as much as 0.8% earlier in the session, following Thursday’s 3.6% surge.

Asian bourses were broadly higher to extend recent gains. China’s Shanghai Composite rose 1.6%, and Japan’s Nikkei Stock Average advanced 1.4%.

Gold futures declined to about $1,742 an ounce, and crude-oil futures fell below $93.50 a barrel. The U.S. dollar gained ground against the euro and the Swiss franc, but eased against the yen.

In corporate news, Hewlett-Packard was the Dow’s biggest gainer, rising 2.6%, after the technology company said it will keep its $40 billion personal-computer business. The decision reversed a plan disclosed earlier this summer to shed the unit.

Shares of Merck rose 1.9% after the blue-chip pharmaceutical company’s third-quarter profit soared and revenue jumped 8% on higher sales of diabetes drugs and its Gardasil cervical-cancer vaccine.

Elsewhere, Advanced Micro Devices climbed 7.2% after the semiconductor maker reported third-quarter earnings and revenue that exceeded expectations. Robust demand for its notebook-computer chips helped to fuel the results. AMD also provided an upbeat outlook for fourth-quarter revenue.

Whirlpool slumped 12% after the appliance maker revealed third-quarter results that missed expectations. The company also lowered its full-year earnings outlook and disclosed a cost-cutting plan that included a 10% reduction in its work force.

Goodyear Tire & Rubber gained 5.8% after the tire maker reported its third straight quarterly profit.

-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com

Bloomberg – U.S. stocks fell, extending the biggest quarterly drop since 2008 for the Standard & Poor’s 500 Index, after reports from China and Germany fueled concerns the global economy is slowing.

Equities trimmed declines after consumer companies that sell necessities reversed declines and U.S. data showed business activity and consumer confidence topped projections. Companies most tied to economic growth had the biggest declines among 10 groups in the S&P 500. American Express Co. fell 2.2 percent, while General Electric Co. lost 2.4 percent. Micron Technology Inc. slid 12 percent after reporting an unexpected loss on weak demand for personal computers.

The S&P 500 retreated 0.8 percent to 1,151.13 at 12:01 p.m. New York time, after falling as much as 1.7 percent earlier. The Dow Jones Industrial Average lost 39.88 points, or 0.4 percent, to 11,114.10.

“Investors are hypersensitive to any data at the moment,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $350 billion, said in a telephone interview. “Ordinary announcements have heightened significance in an environment where investors are watching for potential shifts in the trajectories of the domestic and global economies.”

The S&P 500 yesterday rose 0.8 percent as lower-than- estimated claims for unemployment benefits helped offset losses in consumer and technology shares. The index is heading toward its fifth monthly loss, the longest falling streak since March 2008. The U.S. equity gauge has tumbled 13 percent this quarter, poised for the biggest three-month drop since December 2008, and is down 8.4 percent for the year.

–With assistance from Cecile Vannucci in Amsterdam, Alexander Kowalski in New York, Simone Meier in Zurich and Grant Smith and Gabi Thesing in London. Editor: Jeff Sutherland