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Dow Below 12k; Stocks Head For 6th Down Week (06/10/2011)

(AP) The Dow Jones industrial average below 12,000 on Friday, the first time the Dow has dropped below that mark since March. Fears that the global economic recovery has stalled also weighed on other indexes.

The Dow fell 142 points, or 1.2 percent, to 11.981 in afternoon trading.

The Standard & Poor's 500 index fell 15, or 1.1 percent, to 1,274. The Nasdaq dropped 30, or 1.1 percent, at 2,654. The Nasdaq has now given up nearly all its gains for the year. The Dow is still up 3.5 percent for 2011 and the S&P 1.4 percent.

The losses were broad, with declines across all 10 of the S&P 500's industry groups. All but two of the 30 companies in the Dow also fell.

The stock market is on track for its sixth straight weekly loss, which would be the longest weekly losing streak since the fall of 2002. If the losses continue into next week, it would be the first time in 10 years that the market suffered a seven-week stretch of losses. The last such stretch began in May 2001 as the dot-com bubble deflated.

Weak economic news has dampened hopes for a speedy recovery, sending stocks down. Traders worry that weaker hiring, sluggish industrial output, and a moribund housing market are reversing a bull market that has lifted the Dow 20 percent over the past year.

The Dow has fallen 4.6 percent since the beginning of June.

Shares had bounced back Thursday, breaking six straight days of losses after U.S. exports unexpectedly hit a record in April. By Friday morning, those gains had evaporated.

Analysts said the pullback reflects traders' insecurity about the pace of the recovery. But several said it does not signal a longer-term retreat.

Jack Ablin, chief investment officer at Harris Private Bank, said strong corporate earnings and widespread economic growth, however slow, should lead to more gains in the coming months. ""Anyone selling shares today has to be pricing in a recession," he says. That's something he does not believe is warranted. He also noted that trading volume was light on a hot, summer Friday as many traders ended their week early. Lighter volume can make trading more volatile.

Ablin suggested that Friday's losses were driven by the Federal Reserve's unloading millions in risky mortgage bonds onto the market. As big banks buy those securities, they are offsetting the risk by dumping assets such as stocks and high-yield corporate bonds.

Karyn Cavanaugh, vice president and market strategist with ING Investment Management, also advised investors to stick out the market's recent turbulence.

"The market doesn't go up indefinitely; it's not a straight line and it does get choppy at times," she said. Cavanaugh said seven straight quarters of stronger-than-expected corporate earnings are a clear signal that the bull market is continuing.

Strong demand from faster-growing economies overseas is offsetting weak consumer spending in the U.S., she said.

Earlier Friday, a smaller than anticipated Chinese trade surplus in May and a bigger than expected decline in British industrial production in April led to fears that growth is also slowing overseas, not just in the U.S.

Asian markets were mixed after the report showing weak imports to China suggested that demand might decrease for commodities such as oil and iron ore.

Economists say Beijing's efforts to temper rapid growth by curbing lending and investing could cool its economy too quickly. Weakness in China could hurt the global commodities trade if it cuts into demand for oil, iron ore and other industrial inputs for which China is a key customer.

China's mixed trade report followed surprisingly strong data for U.S. trade that helped lift stocks on Thursday. The government said on Thursday that U.S. exports hit a record in April. Trade factors into the government's broad calculation of economic growth, known as gross domestic product.

The euro fell below its recent highs on signs that European policymakers have reached an impasse over how to handle Greece's drawn-out debt crisis.

The yield on the benchmark 10-year Treasury note fell as investors put money into low-risk investments. The yield fell to 2.96 percent Friday afternoon, having traded above 3 percent Thursday as the stock market rallied. Bond yields fall and their prices rise when demand for them increases.

In corporate news, shares of solar chip maker MEMC Electronic Materials Inc. fell 3 percent after an analyst downgraded the stock, saying prices for solar wafers are falling rapidly because of overproduction in China.

Goodyear Tire fell 7 percent, the most in the S&P 500, after the company agreed to sell its Asian wire business to South Korea's Hyosung Corp. for $50 million. Analysts with J.P. Morgan Chase & Co. said they expect "significantly weaker" demand for replacement tires.