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Stocks Struggle After Mixed Consumer Reports

Stocks struggled Friday as investors digested mixed readings on the consumer: Retail sales rose unexpectedly last month, while consumer sentiment softened.

The Dow bobbed in and out of negative territory. American Express, Home Depot and Merck led advancers.

Pfizer and Travelers were at the bottom of the pack.

Bailout plays Citigroup and AIG declined.

The government said retail sales grew 0.3 percent in February despite a drop in auto sales and crippling snowstorms that were expected to weigh on economic numbers for the month. Excluding auto sales, retail sales jumped 0.8 percent. Economists had expected retail sales to decline.

“This retail-sales number — something that people really had negative expectations for — especially with the weather that affected two different weekend days in February — and still coming out to the point that you really can’t bet against the American consumer right now,” Art Hogan, director of global equities at Jefferies, said on CNBC this morning. "I think the consumer has loosened up the purse strings and that continues to bode well for the balance of this year and that points us in the direction of a sustainable recovery," he said.

Meanwhile, Reuters and the University of Michigan reported their consumer-sentiment index dropped to 72.5 in a mid-March reading from 73.6 at the end of February. Economists had expected the gauge to climb to 74.

Business inventories were flat in January after a revised 0.3-percent drop in December. Economists had expected a 0.1-percent increase in the latest reading.

The Fed meets next week. Traders will be watching for any signals about when they plan to start raising interest rates -- or at least when they plan to remove that "extended period" language from the statement.

Ahead of that meeting, reports today suggest that President Obama is likely to tap San Francisco Fed President Janet Yellen, a respected policy dove, for the post of vice chairman, essentially the No. 2 spot after Chairman Ben Bernanke. She would succeed Donald Kohn, a longtime Fed veteran, who is planning to retire in June.

On the M&A front, Norwegian fertilizer group Yara International said it won't raise its bid for rival Terra Industries , leaving the door open for CF Industries Holdings to buy Terra.

Asian stocks closed mixed as China is struggling to strike a monetary policy balance, while European shares were higher as production data from the euro zone showed the region may be in for a stronger-than-expected recovery.

Send comments to cindy.perman@nbcuni.com.