Are Dow, S&P headed for 7th losing week?

New York - The Dow and S&P 500 closed out their sixth week of losses on Friday as further signs of a global economic slowdown set the stage for more losses ahead.

The deepening gloom raised the prospect for the S&P, which suffered its worst week since August 2010, to break below the year's low of 1 250 next week.

The Nasdaq wiped out its yearly gains on Friday and also posted its biggest weekly decline since August 2010, as the latest deterioration in sentiment came on fear of flagging Chinese growth and fresh worries about Greece's debt crisis.

The Dow closed below 12 000 for the first time since mid-March.

Reflecting the bearish sentiment, options traders eyed calls on the CBOE Volatility Index, Wall Street's so-called fear gauge, which moves inversely to the S&P 500's performance. The VIX rose 6.1% to end at 18.86.

"We broke below the April low, which was about 1 295 (on the S&P 500) pretty much at the open today. We are probably going to test the March lows if data next week remain weak," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"But investors are very susceptible to any kind of news and since we are very oversold here, we could see the market instantly bounce back if we get anything remotely good."

The Dow Jones industrial average fell 172.45 points, or 1.42%, to 11 951.91. The Standard & Poor's 500 Index slid 18.02 points, or 1.40%, to 1 270.98. The Nasdaq Composite Index tumbled 41.14 points, or 1.53%, to 2 643.73 at the close

For the week, the Dow was down 1.6% the S&P 500 was off 2.2% and the Nasdaq was down 3.3%.

The S&P 500 has fallen about 6.6% from its intraday peak early last month. Many see the benchmark index sliding back down to around 1 250, its March low, where valuations could bring investors back into equities.

At 1 250, the S&P 500 would be roughly 1.7%  below current levels and approaching a 10% decline commonly referred to as a correction.

Financials decline

Bank stocks, already under pressure, finished lower, with the KBW Banks Index dropping 0.4% after sliding more than 2% earlier in the day. The Federal Reserve said it will subject more banks to annual stress tests to determine whether they have enough capital and can raise their dividends.

Some of the biggest decliners were regional bank stocks that are now going to face annual tests.

But large banks, including JPMorgan Chase and Bank of America, rose in a late rebound, on a news report that the extra capital charge on big banks will likely be 2% to 2.5%, compared with the widely predicted 3%, traders said.

China's sales to the United States and the European Union slumped to their weakest since late 2009, excluding Lunar New Year holidays, underlining the view that the world economy is stumbling.

In another negative for stocks, the euro tumbled more than 1% against the US dollar as fears about Greece's debt returned to the forefront and investors curbed expectations about the European Central Bank's interest-rate hikes. Investors have been recently trading the correlation between stocks and the dollar.