U.S. stocks open higher after positive retail report

U.S. stocks pared their early gains on Friday as traders dissected mixed reports on consumer sentiment, retail sales and business inventories after a week of record-setting gains and losses on Wall Street.

The government says that consumers spent more on autos, furniture and gasoline in July, pushing up retail sales by the largest amount in four months. But a survey on consumer sentiment fell to its lowest level in more than 30 years. And a separate report showed that businesses increased their stockpiles in July by the smallest amount since May 2010.

Traders are already dizzy from seesaw trading driven by concerns about economic growth and a spreading financial crisis in Europe.

In midmorning trading, the Dow Jones industrial average rose 78 points, or 0.7 percent, to 11,222. The Standard & Poor's 500 index was up 6, or 0,5 percent at 1179. The NASDAQ composite index rose 5, or 0.2 percent, to 2,498.

If shares close higher, it will be the first time in more than a month that the market has risen two days in a row. The Dow and the S&P last rose for two trading days on July 6 and 7.

A bath of bad economic news has pummeled markets since before they started their long slide three weeks ago, on July 22. At Thursday's close, the Dow had fallen more than 12 percent since that date.

The strong retail sales added to a recent trend of more positive data about the economy. The government said last week that hiring picked up in July after two dismal months, though employers still are adding jobs too slowly to significantly reduce unemployment. On Thursday, the government said that applications for unemployment benefits had fallen to a four-month low.

But any gains are seen as fragile. If consumer sentiment remain weak, sales would likely slow.

Shares have swung by hundreds of points each day this week as traders react with hair triggers to news about the economy, Federal Reserve policy and a financial crisis in Europe that threatens to spill over into U.S. banks.

High-speed trading by computers has contributed to the volatility, as shares hit high and low levels at which machines are programmed to buy or sell large numbers of shares.

Markets in Europe advanced on Friday and bank stocks recovered some of this week's losses. Regulators of major European exchanges banned the short-selling of financial company shares, protecting them from downward pressure by speculators. Asian markets closed mixed.

France's benchmark index, the CAC-40, rose 3.4 percent despite news that the nation's economy hit the brakes in the second quarter as exporters' wares piled up and consumers held onto their money.

Concerns about the French economy stoked fears about the crisis in the eurozone, where France has the second-largest economy after Germany's. As their heavily indebted neighbors struggle to stay afloat financially, the region's economic powers must shoulder most of the costs of rescuing Greece, Portugal and Ireland from defaulting on their debts. A default would increase borrowing costs and hurt the regional currency.

If France's economy falters or if it loses its AAA credit rating, the nations might have trouble raising the money that they need to pay for future bailouts. Worries about debt issued by Italy and Spain, and the stability of banks there, have prompted the European Central Bank to buy their sovereign bonds to lower their borrowing costs.

Italy and Spain have Europe's third- and fourth-largest economies. The current bailout programs probably would be too small to rescue them from a potential default.

Most other major European markets rose by more than 3 percent, including Germany's DAX index, Italy's FTSE MIB and Spain's IBEX. London's FTSE index rose by more than 2 percent.

The gains followed a winning day on Wall Street that would have ranked as a stunning rally during any normal trading week.

The Dow Jones industrial average soared 423 points on Thursday. It had already fallen 634 points Monday, risen 429 Tuesday and fallen 519 Wednesday. Never before has the Dow had four 400-point swings in a row.

The S&P 500 finished up 4.6 percent and the Nasdaq composite index 4.7 percent.

The Standard & Poor's 500 index has risen or fallen at least 4 percent each day. That has not happened on four consecutive days since November 2008, the depths of the crisis.

American investors were encouraged before the market opened Thursday by news that new claims for unemployment benefits dropped below 400,000 for the first time in more than four months, signaling fewer layoffs and a job market that is improving slowly.