U.S. stocks wavered Friday as blowout earnings from Google were undercut by concerns of another warning about the U.S.'s credit rating and a depressed reading on consumer sentiment.
The Dow Jones Industrial Average recently was down 15 points, or 0.1% at 12422, after bobbing between positive and negative territory for much of the session. The blue-chip index closed on Thursday at a low for the month after losing ground in four of the previous five sessions.
The Standard & Poor's 500-stock index rose 2 points, or 0.1%, to 1311, as energy and technology stocks led advancers. The technology-oriented Nasdaq Composite Index rose 13 points, or 0.5%, to 2776.
Upbeat earnings results from Google helped boost investor sentiment. The Internet-search giant late Thursday posted a surprisingly robust 36% jump in quarterly profit on record revenue. Google experienced strength in its core search business and gained traction with its newer operations, including its new social network Google+. Shares surged 13%.
Google's quarterly report, which gave a boost to technology stocks, came amid a warning from Standard & Poor's late Thursday on U.S. debt. The ratings agency said there is a 50% chance it would lower the AAA bond rating on U.S. debt within three months.
The threat of a possible downgrade comes as the debate over raising the debt ceiling has lasted longer than expected.
House Republicans said Friday they planned to vote next week on a proposal to raise the debt ceiling by $2.4 trillion, with matching cuts and guidelines to control future government spending.
Financial stocks were among the worst decliners in the S&P 500. Citigroup shares recently slumped 1.9%, reversing an earlier gain. The bank's second-quarter profit jumped 24%, but it struggled to grow earnings in many businesses around the world, which diminished investor appetite for the stock.
"The financials aren't doing much despite some decent reports this week," said Todd Salamone, senior vice president of research at Schaeffer's Investment Research. "That's capping any rally attempts that we see."
Stocks also had a muted reaction to the European bank "stress tests" that were released earlier in the session. Eight banks flunked the European Union's stress tests, according to the European Banking Authority. Analysts and investors were bracing for as many as 20 banks to fail.
"The fact that eight banks failed isn't a huge surprise in either direction," said Rick Bensignor, chief market strategist at Dahlman Rose & Co. "We knew there'd be names that wouldn't pass. This is a moderate number."
On the merger-and-acquisition front, Petrohawk Energy soared 63% after Australia's BHP Billiton agreed to buy the company in a deal valued at more than $15 billion, including debt.
Clorox climbed 6.7% after saying it received an unsolicited bid from Icahn Enterprises to buy the company for $76.50 a share.
"The wall of worry is still there," said Brian Gendreau, market strategist with Cetera Financial Group. "But M&A activity is reviving and earnings are providing a stealth source of support for the market."
The U.S economic calendar was chock full of data. The preliminary Reuters/University of Michigan index of consumer sentiment moved to 63.8, much weaker than economists expected.
Meanwhile, consumer inflation last month fell 0.2% from May, the first decline in a year. New York-area manufacturing activity weakened again in July, notching a negative reading for a second straight month.
U.S. industrial production increased 0.2% and industries used 76.7% of their capacity last month, according to a Federal Reserve report. Both figures came in slightly softer than economists expected.
Gold capped a nine-day winning streak with a record settlement at $1,590.10 an ounce on the New York Mercantile Exchange. Crude-oil prices settled above $97 a barrel.
The U.S. dollar strengthened somewhat against the euro, but weakened against the yen.
Mattel's second-quarter earnings rose 56% and beat analysts' estimates, due in part to the strong performance of Cars 2 merchandise. Shares of the largest U.S. toy maker by revenue rose 2.6%.
Biopharmaceutical developer Vical said it would get a $130 million upfront payment from Japan's Astellas Pharma in a new licensing deal to develop and sell its TransVax vaccine. Vical shares rose 5.8%.
-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; firstname.lastname@example.org