Early rally fades; stock market down for the week

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An early rally faded on the stock market Friday, leaving indexes down about 3 percent for the week as worries resurfaced about a breakup of the euro. BlackBerry maker Research in Motion plunged after slashing its forecast for holiday sales.

The Dow Jones industrial average was down 3 points with half an hour of trading left. It had been up as many as 99 points in the morning after the Italian government easily won a confidence vote on austerity measures. The Dow turned mixed around midday as Fitch ratings warned that it might downgrade the debt of Italy, Spain and four other countries that use the euro.

Materials and industrial companies rose, signaling that traders expect the economic recovery to remain on track. The Dow Jones industrial average broke a three-day slump Thursday after a report showing sharply fewer layoffs and signals that business conditions for manufacturers are improving.

Utilities, health care and consumer staples companies companies lagged the market as traders sold stocks that are considered to be safer when the economy is weak.

Some analysts believe nervousness about Europe this fall and winter pushed stock prices lower than their fair value. Investment adviser Uri Landesman, president of Platinum Partners, expects stocks to rise into next year because of the growing likelihood that economic news and European headlines will remain positive.

“The odds are, the news is going to be better than the market is discounting,” Landesman said. He said the market is near the low end of its recent trading range, and a dose of positive news could set off a mini-rally. Any market moves next week could be sharp as trading volume thins out before the Christmas holiday, Landesman said.

The Dow Jones industrial average was down 3 points at 11,865. The Standard & Poor’s 500 index rose 4, or 0.4 percent, to 1,220. The Nasdaq composite index rose 14, or 0.6 percent, to 2,555. The Dow is down 2.7 percent for the week; the S&P 2.0 percent. The Nasdaq lose 3.5 percent.

The yield on the 10-year Treasury note plunged to 1.85 percent from 1.93 percent earlier Friday after the government said consumer prices were unchanged last month, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn’t diminish the buying power of the fixed return a bond provides over time.

The gains on the stock market were broad. Eight of the 10 industry groups in the S&P 500 index rose, led by materials and industrial companies. U.S. factories in some regions have seen shipments and orders rise this month, according to two surveys released Wednesday. Materials companies are benefiting from soaring commodity prices.

Research In Motion Ltd. plummeted 11 percent after the company said late Thursday that new phones seen as critical to its future will be delayed until late next year. RIM also is taking a big loss on unsold tablet computers and predicted that its BlackBerry sales will fall sharply during the holiday sales season.

Online game developer Zynga Inc. fell 5 percent in its first day of trading on the Nasdaq. The maker of Farmville’s initial public offering was priced late Thursday at $10 per share, raising $1 billion. That means the San Francisco company can boast the biggest Internet IPO since Google Inc. first offered shares in 2004.

Among the other companies making big moves:

? New York-area cable TV provider Cablevision Systems Corp. plunged 9 percent following the sudden departure of its chief operating officer, Tom Rutledge.

? Adobe Systems Inc. jumped 8.4 percent after the software maker reported earnings and revenues that were far better than what analysts had expected. Analyst Walter Pritchard at Citigroup said the quarter was a “blow-out when most expected weakness.”

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Follow Daniel Wagner at www.twitter.com/wagnerreports.