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Stocks Snap Three-Week Losing Streak But Concerns Linger


NEW YORK (TheStreet) -- Stocks closed on a weak note Friday, as investors remained concerned about the mounting eurozone crisis heading into the holiday weekend.

A much stronger than expected final read on consumer sentiment failed to bring out the buyers as the headlines from across the pond were predictably dour, including news that the bailout tab for partially nationalized Spanish institution Bankia will be roughly $24 billion. In addition, Standard & Poor's moved to downgrade Spain's biggest banks amid the threat of a double-dip recession in the country.

Volumes were low with 2.86 billion shares trading on the New York Stock Exchange and only 1.2 billion in play on the Nasdaq.

The Dow Jones Industrial Average dropped 76 points, or 0.6%, to close at 12,454, after trading as high as 12,533.

The S&P 500 finished lower by 3 points or 0.2% to close at 1318. The Nasdaq dipped nearly 2 points, or 0.1%, to close at 2837.

Stocks did manage to break their three-week losing streak however, with the Dow adding 0.7% over the week. The S&P 500 gained 1.7% over the week, and the Nasdaq rose 2.1%.

Breadth within the Dow was negative with 22 stocks finishing lower, led by JPMorgan Chase (JPM), Caterpillar (CAT) and Boeing (BA). Basic materials, capital goods and transportation were the hardest-hit sectors.

Shares of JPMorgan fell 1.5%. CEO Jamie Dimon has been called to testify before the Senate on June 7 regarding the bank's massive trading loss. The bank continues to reel from the damage of the disclosure, with calls to break up the bank growing louder.

The worries about the fiscal health of Spain and the financial stability of its banking system flared up on Friday, causing the euro to retreat to a two-year low.

Aside from the Bankia bailout news, Standard and Poor's cut its ratings on five banks with Bankia's bonds seeing a cut to junk status. The rating agency also raised its risk assessment of Spain's economic imbalances to "very high risk" from "high risk."

Adding to the mix, traders were dealing earlier in the day with a Financial Times report that some of Europe's largest fund managers were dumping their euro assets on Greek uncertainties.

"The ripple effects -- that's what everybody's worried about with Europe," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com.

He thinks if European leaders were able to come up with a temporary six-month fix for eurozone debt contagion problems amid their ongoing meetings, it could be enough to get the markets "back to the races."

Still, London's FTSE settled up 0.03%, and the DAX in Germany closed up 0.4% amid signs that consumer confidence was stabilizing in the country. Earlier in Asia, the Hang Seng index in Hong Kong settled up 0.3% and Japan's Nikkei closed up 0.2%.

In the U.S., investors were stepping back to digest the negative headlines ahead of the long weekend. "Desks are half-staffed, or there's just a skeleton crew at most desks and things are quiet" ahead of the Memorial Day holiday weekend, said Lawrence Creatura, portfolio manager at Federated Investors.

"Given that everybody made money earlier in the year, they're figuring, 'what I'll do is given all this risk, let me take some stuff off the table and I'll go to the beach,'" said Doug Roberts,

Stock quotes in this article: PAY, BLOX, SMTC, FB, MS, UBS, C, KCG, CHK, BLK 

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