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Dow Logs Worst Week of 2012; JPMorgan Skids

Friday, 11 May 2012 | 5:00 PM ET

Stocks faded in the final hour of trading to close mixed Friday, with major indexes logging a second weekly decline, pressured by news of JPMorgan's trading loss and amid ongoing worries over the euro zone.

The blue-chip index logged its biggest weekly drop this year.

The Dow Jones Industrial Average slipped 34.44 points, or 0.27 percent, to close at 12,820.60. JPMorgan saw its biggest selloff in almost 9 months, while Verizon gained.

The S&P 500 erased 4.60 points, or 0.34 percent, to finish at 1,353.39. The Nasdaq squeezed out a gain of 0.18 points, or 0.01 percent, to end at 2,933.82 points. The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended near 20.

For the week, the Dow tumbled 1.67 percent, the S&P 500 fell 1.15 percent, and the Nasdaq dipped 0.76 percent. Cisco was the biggest weekly laggard on the Dow, while Disney rallied.

Among the key S&P sectors, materials led the weekly decliners, while telecoms finished higher.

Stocks got a lift earlier in the session following a report that consumer sentiment rose to its highest level since 2008in May.

But most of the day's focus was on JPMorgan after the banking giant disclosed that it suffered a trading loss of at least $2 billionfrom a failed hedging strategy. The firm estimates the business unit with the portfolio will post a loss of $800 million in the current quarter, excluding private equity results and litigation expenses. The bank previously forecast the unit would make a profit of about $200 million.

JPMorgan’strading loss, initially announced after-the-bell Thursday, dragged on the entire banking sector, pulling shares of Citigroup, Goldman Sachs and Morgan Stanley lower. At least five brokerages slashed their price target on JPMorgan, while FBR and Stifel cut their rating on the firm to "market perform" from "outperform" and "hold" from "buy," respectively.

“The ripple effect from financials will spread across,” said Todd Schoenberger, managing principal of The BlackBay Group. “This has been a chaotic week—I don’t know how a retail investor could be comfortable investing in this market.”

How to Trade Next Week's Earnings
Jim Iuorio, TJM Institutional Services, offers insight on how to trade stocks ahead of their earnings report next week, including Groupon, Wal-Mart and Home Depot.

In the latest news from Greece, socialist party leader Evangelos Venizelos failed to form a new coalition government after hosting last-minute talks, crushing earlier hopes that the debt-ridden nation would avoid another round of elections next month.

“There’s no easy solution to problems in Europe,” said Jeff Schwarte, portfolio manager at Principal Global Investors. “Investors are growing frustrated—the U.S. market fundamentals are pretty strong, but we’re pulled down by [Europe].”

Still, Schwarte said the “biggest challenge” for the U.S. market is the "fiscal cliff at the end of the year,” where a series of stimulus programs and tax cuts expire.

“But longer-term oriented investors would benefit from an entry point around the summer,” advised Schwarte, adding that he favors consumer discretionary, home improvement and tech stocks.

Verizon and AT&T were among the top performers on the blue-chip index after Credit Suisse raised its rating on both telecom companies to "outperform" from "neutral." Meanwhile, Leap Wireless International surged after news AT&T had held talks to buy the smaller rival.

Apple was in the spotlight after Foxconn CEO reportedly said they are "making preparations" for an iTV but manufacturing and development has not started, according to the China Daily. The stock finished slightly lower.

Netflix jumped after the video-streaming company's director Jay Hoag bought 200,000 shares of the firm.

Among earnings, Nordstrom slumped after the department-store chain missed Wall Street expectations. And Nvidia surged after the chipmaker reported revenue and outlook that topped estimates.

Almost 450 of the S&P 500 companies have posted earnings so far, with 66.4 percent of firms exceeding estimates, according to Thomson Reuters data, down from more than 80 percent at the start of earnings season.

Arena skyrocketed after the drugmaker's experimental obesity pill won an FDA panel's support.

Meanwhile Facebook's record IPO is already oversubscribed, according to a source familiar with the share listing, days after the social network giant embarked on a nation-wide roadshow. Shares are expected to begin trading on May 18.

Also on the economic front, producer prices posted a surprising dropin April as energy costs declined, according to the Labor Department.

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap Next Week:

MONDAY: Earnings from Groupon
TUESDAY: CPI, retail sales, Empire state mfg survey, Treasury international capital, business inventories, housing market index, JPMorgan shareholders mtg, Morgan Stanley shareholders mtg, credit-card default rates reported; Earnings from Home Depot, Dick's Sporting Goods, TJX, Saks, JCPenney
WEDNESDAY: Weekly mortgage apps, housing starts, industrial production, oil inventories, FOMC minutes, AIG shareholders mtg, Southwest Air shareholders mtg; Earnings from Target, Abercrombie & Fitch, Deere, Staples, Limited Brands
THURSDAY: Jobless claims, Philadelphia Fed survey, e-commerce retail sales, leading indicators, Facebook pricing, Home Depot shareholders mtg, Intel shareholders mtg; Earnings from Wal-Mart, Dollar Tree, Ross Stores, Aeropostale, Gap, Marvell Tech
FRIDAY: Facebook begins trading, JCPenney shareholders mtg, G8 summit begins; Earnings from Ann

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