Stocks pare early gains after weak factory report

    Stocks gave up early gains and were trading mixed Friday as weak economic data and fears about shaky European banks overshadowed strong corporate earnings reports.

    The government said Friday that U.S. factories produced fewer autos in June and overall factory output was flat. It was third straight weak month for manufacturers. Auto production declined in all three months because automakers were unable to obtain parts after the earthquake and tsunami disaster in Japan.

    Stocks opened higher after Google Inc., Mattel Inc. and Citigroup Inc. all reported gains in quarterly income. Shares of Clorox Co. and Petrohawk Energy Corp. spiked after buyout offers for the companies.

    Major indices are still down for the week following two weeks of gains. Traders hoped to extend recent gains after an eight-week slump brought on in part by Europe’s worsening debt troubles.

    Investors are waiting for results of stress tests designed to show how well Europe’s biggest banks would be able to handle steep losses on European government bonds. The results will indicate which banks need to raise money in case bonds issued by Greece, Portugal or Spain lose value. The results will be released after European markets close for the weekend.

    In morning trading, the Standard & Poor’s 500 index was nearly flat. The Dow Jones industrial average edged up 8, or 0.1 percent, to 12,445. The Nasdaq composite index gained 9, or 0.3 percent, to 2,772.

    U.S. oil and gas producers rose after Australian natural-resource giant BHP Billiton Ltd. said it would buy Petrohawk Energy Corp. for $12.1 billion, feeding speculation about which company might be the next takeover target. BHP was attracted to the long-term value of Petrohawk’s U.S. natural gas reserves.

    Petrohawk shares soared 15 percent, lifting other companies with natural gas holdings. Among the strongest gainers: Cabot Oil & Gas Corp. rose 8 percent, Pioneer Natural Resources Co. and Chesapeake Energy Corp. rose 7 percent and Southwestern Energy Co. rose 5 percent.

    Mattel shares rose 4 percent after the company said its net income jumped 56 percent in the second quarter, helped by strong demand for Barbie and “Cars 2” toys.

    Google jumped 12 percent, the most in the S&P 500 index, after the company said its net income increased 36 percent from the year-ago quarter and revenue hit an all-time high. Google reported after the markets closed Thursday.

    Citigroup Inc. shares edged up after the bank said its income increased in the second quarter because fewer borrowers are defaulting on their loans.

    Clorox Co. shares surged 7 percent after billionaire investor Carl Icahn offered to take the company private in a deal that values the household products company at $10.2 billion. He offered 12 percent more for shares than they were worth at Thursday’s close.

    The government said early Friday that consumer prices excluding food and energy rose in June at the fastest pace in three years as people paid more for autos, clothes and housing. Overall prices fell modestly because of falling fuel prices.