Stocks recover losses after lower open

NEW YORK -- Stocks pared their losses after opening lower Friday following a government report that August retail sales excluding autos fell sharply.

The report suggested consumers held off spending in the face of turmoil in the financial markets, though perhaps helped cement arguments of those calling for the Federal Reserve to cut its benchmark federal funds rate when policymakers meet Tuesday.

The rebound in stocks came alongside a similar recovery in Europe. Markets overseas had fallen, at times sharply, after the Bank of England approved emergency funding for lender Northern Rock PLC to head off a possible liquidity crisis. Northern Rock issued a profit warning and blamed the shortfall on credit market turmoil.

In late morning trading, the Dow Jones industrial average fell 8.29, or 0.05 percent, to 13,418.05.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 1.95, or 0.13 percent, to 1,482.00, and the Nasdaq composite index lost 4.30, or 0.17 percent, to 2,596.76.

Bond prices rose, though more modestly than earlier in the session. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.46 percent from 4.48 percent late Thursday.

Some investors had moved out of stocks and into bonds as some of the sense of safety that drove stocks higher Thursday took a hit. One area of concern was the Commerce Department's report that retail sales fell 0.4 percent in August excluding vehicle sales. Wall Street had expected a 0.1 percent increase after a 0.7 percent rise in July.

Investors have been on edge over whether tightness in the credit market, a housing slump and volatility on Wall Street have dented consumer spending. As consumer spending accounts for more than two-thirds of economic activity, investors are mindful of anything that could cause a retrenchment.

In another report that perhaps stirred unease about the economy, industrial production in August edged up by just 0.2 percent, the weakest advance in three months. The figure reflects a 0.3 percent decline in output from U.S. factories.

Merrill Lynch downgraded shares of chip maker Intel Corp. and payment card provider American Express Co., Dow Jones Newswires reported, sending both stocks lower. Intel fell 30 cents to $25.05, while American Express fell $1.40, or 2.3 percent, to $59.20.

A separate report Friday showed that consumer confidence, as measured by the RBC Cash Index, fell to 71.1 in early September, a sharp drop from an August's level of 89.3. It was the worst reading since May 2006.

A reading of the Reuters/University of Michigan consumer sentiment index showed results were largely even with August. The mid-September figure came in at 83.8, an increase from 83.4 last month.

Investors in London reacted badly to news of the Bank of England bailout as it heightened concerns about the viral nature of problems in the U.S. subprime mortgage market. Britain's FTSE 100 was recently of 1.05 percent after being down 2 percent.

Other European stock markets also fell. Germany's DAX index fell 0.37 percent, while France's CAC-40 fell 0.22 percent.

The Dow rose more than 130 points on Thursday, helped by strong gains in shares of McDonald's Corp., which raised its dividend, and General Motors Corp. on reports of progress with labor negotiations.

Oil prices fell 25 cents to $79.84 on the New York Mercantile Exchange. Gold prices also weakened, as the U.S. dollar traded mixed against other major currencies.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 303.5 million shares.

The Russell 2000 index of smaller companies fell 1.85, or 0.24 percent, to 778.50.

In Asia, Japan's Nikkei stock average closed up 1.94 percent, while Hong Kong's Hang Seng Index gained 1.47 percent.