May 25, 2012 / 6:14 PM / 5 years ago

US STOCKS-Wall St flat ahead of long weekend

4 Min Read

* French banks plan for Greek euro-zone exit -sources

* U.S. consumer sentiment in May at highest since October 2007

* Dow off 0.3 pct, S&P off 0.02 pct, Nasdaq down 0.1 pct

By Ryan Vlastelica

NEW YORK, May 25 (Reuters) - U.S. stocks were little changed on Friday as investors held off on making large bets ahead of a three-day weekend as uncertainty continued to swirl over Europe.

Warnings about Greece kept investors cautious, as did new developments with Spain after Standard & Poor's downgraded five banks and a source told Reuters that Bankia asked for $24 billion in state aid. However, a bullish read on U.S. consumer sentiment kept pessimism in check.

Industrial and energy shares were the day's weakest, while defensive sectors performed the best. Boeing Co and Chevron Corp were the biggest decliners on the Dow, followed by Caterpillar Inc. All fell more than 1 percent in the thinly traded session.

"The market is drifting and cautious ahead of the holiday. There's no consistency, though we do seem to be digging in after some bad weeks," said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.

"Still we have the overhang of Europe and just have to hope things don't get worse over there."

Belgium's Deputy Prime Minister Didier Reynders issued a warning over Greece, saying it would be a "grave professional error" if central banks and companies were not preparing for a Greek exit from the euro zone.

French banks, which are among the lenders most exposed to Greece, have stepped up their efforts on contingency plans for the debt-laden country leaving the euro zone, sources familiar with the situation said.

The Dow Jones industrial average was down 44.73 points, or 0.36 percent, at 12,485.02. The Standard & Poor's 500 Index was down 0.25 points, or 0.02 percent, at 1,320.43. The Nasdaq Composite Index was up 3.36 points, or 0.12 percent, at 2,842.74.

The S&P is up 2 percent this week, on track to break a three-week string of losses with its best weekly performance since mid-March. The Dow is up 1 percent while the Nasdaq is up 2.3 percent. Trading has been choppy all week, with stocks usually opening lower or flat, only to add gains heading into the close.

Even with the S&P 500's 5.3 percent drop since the end of April, U.S. stocks have held up relatively well as bear markets rage in Brazil, Russia, peripheral Europe, and many core European equity markets have give up all their gains for the year. The S&P 500 is still up 5.1 percent for the year to date.

The S&P 500's top gainer was telecom services - a sign that investors were looking for safety in defensive U.S. sectors, possibly as money returns from riskier emerging markets and Europe. The S&P telecoms index rose 0.5 percent.

At the end of last week, the S&P 500 tested support at the 1,290 mark and has inched away from that level during the week. Some analysts are expecting the benchmark index to test its 200-day moving average at 1,281 and possibly fall below that.

Chesapeake Energy Corp gained 2.4 percent to $15.95, up for the second day after the company announced it has put a half-million acres in Wyoming and Colorado up for sale.

Data showed Thomson Reuters/University of Michigan Surveys of Consumers' final May consumer sentiment index rose to 79.3 from 77.8 in the preliminary May report. It was the highest level since October 2007. Market reaction was muted.

In the aftermath of last Friday's botched initial public offering of Facebook, lead underwriter Morgan Stanley will adjust thousands of trades to ensure outstanding limit orders to sell will be filled at no more than $42.99 a share, the firm told its brokers on Thursday, according to several who listened to the call.

Facebook's stock lost 3.8 percent to $31.78, close to its all-time intraday low of $30.94.

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