Shares gained as Germany agreed under pressure from France not to force private investors to take on some of the burden of a new bailout package for Greece. The announcement in Berlin meant Germany was backing away from a sticking point with the European Central Bank on the issue.
The market pared its gains late in the day, however, after Moody’s Investors Service put Italy’s government bond ratings on review for possible downgrade. The rating agency cited growth challenges, a likely rise in interest rates and risks posed by changing funding conditions in Europe as among the reasons for the review.
At the close, the Dow Jones industrial average was 42.84 points, or 0.4 percent, higher at 12,004.36, while the Standard Poor’s 500-stock index was up 3.86 points, or 0.3 percent, to 1,271.50. The Dow rose 0.4 percent and the S. P. edged up just 0.04 percent for the week — the first weekly gains since April 29.
The Nasdaq composite index closed lower Friday, falling 7.22 points, or 0.3 percent, to 2,616.48, its fifth consecutive weekly loss.
The euro continued to be buffeted by European debt developments, reacting sharply on Friday to the announcement by Chancellor Angela Merkel of Germany about the Greek bailout.
“That is when the euro popped,” said Brian Dolan, the chief currency strategist for Forex.com. The European currency rose to $1.4306 in late New York trading from $1.4207 late in the day on Thursday.
Mr. Dolan said that the debt issue was likely to continue to weigh on the European currency, however. “You get a short-term rebound in the euro but the long-term issues are still there, and that is going to prevent the euro from a sustained recovery,” he said.
In European markets, the CAC-40 in Paris rose 31.43 points, or 0.8 percent, to 3,823.74. The DAX in Germany was up 53.85 points, or 0.8 percent, at 7,164.05, and the FTSE in London gained 16.13 points, or 0.3 percent, to 5,714.94.
Bruce McCain, chief investment strategist of Key Private Bank, said concerns about European debt and a slowdown in the United States economy had probably pushed United States stock prices down too far, too quickly. “We priced in a lot of negatives over a short time period,” he said. With investors having reduced their exposure to equities, he said, now the market “has the opportunity to rally a bit.”
In the bond market, Treasury issues slipped Friday after rallying on Thursday in response to European debt worries. The Treasury’s benchmark 10-year note yield fell 5/32, to 101 18/32, and the yield rose to 2.94 percent.
Analysts said that even if Europe can agree on the details of a rescue package for Greece, worries will persist about political stability in the country as well as a possible contagion effect on Ireland, Italy, Spain and Portugal.
“The problems in the euro zone don’t begin and end with Greece,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company.
In stock market trading on Friday, financials, consumer staples, utilities and telecommunications shares rose by more than 1 percent. Among the gainers, I.B.M. rose 1.8 percent to $164.44, JPMorgan Chase gained 1.1 percent to $40.80, ATT climbed 1.1 percent to $30.77 and Microsoft rose 1.1 percent to $24.26.
Among the day’s biggest decliners was Research in Motion, maker of the BlackBerry smartphone. The company, which has struggled to compete with Apple’s iPhone and Google Android phones, reduced its earnings outlook for the second time this year after the market close on Thursday. RIM shares plunged 21.45 percent Friday to $27.75.
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