Stocks Fight Off U.K. Scare

Updated from 4:05 p.m. EDT

Stocks clawed back from an early tumble Friday and closed to the upside as traders managed to look past trouble for an overseas mortgage lender and a mixed bag of economic data.

After dropping 100 points just after the open, the Dow Jones Industrial Average fought its way higher and finished ahead by 17.64 points, or 0.13%, at 13,442.52. The S&P 500 tacked on 0.30 point, or 0.02%, at 1484.25, and the Nasdaq Composite rose 1.12 points, or 0.04%, to 2602.18.

The initial weakness came after U.K. lender Northern Rock sought emergency funding from the Bank of England. The company also warned that 2007 earnings will come in below current estimates and that profits in 2008 will be hit. Shares of Northern Rock slid more than 20% in European trading.

Bourses across the Atlantic fell hard following the news, but were rebounded near the end of their session. London's FTSE 100 was down 1.2%, the CAC 40 in Paris was off 0.5%, and Germany's Xetra Dax was lower by 0.5%.

On the other hand, indices in Asia jumped following a strong session in the U.S. last time out. Japan's Nikkei 225 climbed 1.9% and Hong Kong's Hang Seng rose 1.5% overnight.

"A lot of people now think we're near the end of this subprime issue," said Paul Mendelsohn, chief investment strategist with Windham Financial. "There's not much transparency to it and the flight-to-quality is still there, but it's not as massive. That could indicate that the unwinding of the carry trade is slowing down to the point where it's not significant, which is a sign of things leveling off."

In addition to the news out of Northern Rock, traders also had to deal with a weaker-than-expected report on consumer spending and a flood of other data.