Stocks claw out a gain after late rally

NEW YORK (CNNMoney.com) -- Stocks erased big losses by the close Friday, with technology shares leading the advance, following a three-session rout that had taken the market to its lowest point since last fall.

The Dow Jones industrial average (INDU) added 10 points, or 0.1%, ending at 10.012. The Dow had fallen as low as 9,835 earlier.

The S&P 500 index (SPX) rose 3 points, or 0.3%, and the Nasdaq composite (COMP) gained 16 points or 0.7%. All three major indexes had touched three-month lows before recovering.

Stocks fell sharply in the afternoon as worries about a growing debt crisis in Europe exacerbated uncertainty about the U.S. economic outlook. But the market changed direction as the dollar trimmed bigger gains and some of the selling pressure gave way.

"There may be some late-day buying coming in because the market has sold off pretty dramatically over the last few days," said Haag Sherman, managing director at Salient Partners.

Worries about the Euro zone caused investors to dump riskier assets and plow money into the U.S. dollar and government debt. The greenback rose to a more than 6-month high versus the euro and also gained against the yen. The dollar's strength then dragged on commodity prices, oil and gold stocks and companies and sectors that have been benefiting from a weaker dollar.

"A lot of the selling that we're seeing is technical, and it's all being driven by the dollar," said Jamie Cox, managing partner at Harris Financial Group.

He said that because there's a flight to quality into the dollar, assets that have been benefiting from a weak dollar are getting hit. However, he said that the trend was temporary and that once the panic washed out, buyers would move back into riskier assets.

Debt crisis: Stocks plunged Thursday on worries that rising debt problems in Greece, Portugal and Spain could throw a wrench into any economic recovery in Europe, which would then influence the United States.

The news that the opposition parties defeated the Portuguese government's austerity plan provided another reminder, if any were needed, that European countries will find it extremely difficult to get a grip on their public finances.

Global markets continued to slide Friday, with Asian and European markets ending lower.

The global jitters overshadowed a U.S. government report that showed moderating job losses despite an improved unemployment rate.

"The employment report was a mixed bag overall, but the market is more focused on what is happening globally," said David Rosenberg, chief economist at Gluskin Sheff & Associates.

He said that with heightened concerns over nations' debt, risk premiums go up and the outlook for the economy and stock market gets cloudier.

Rosenberg said U.S. investors are focused on whether there will be a default or bailout in Greece, and how this will affect the euro and the dollar. "All of this is going to impact U.S. markets," he said.

On the move: The strong dollar again dragged on commodity prices, and energy and metal stocks fell through most of the session. But in the last hour turnaround, oil and gold stocks cut losses or turned higher.

Strength in big tech stocks such as Cisco Systems (CSCO, Fortune 500), Intel (INTC, Fortune 500), IBM (IBM, Fortune 500) and Microsoft (MSFT, Fortune 500) helped temper broader losses and eventually led a comeback.

In other news, Goldman Sachs (GS, Fortune 500) has surprised many on Wall Street by announcing that it is paying CEO Lloyd Blankfein $9 million in company-restricted stock as his bonus. Blankfein was expected to receive a heftier payment.

Earlier, JPMorgan (JPM, Fortune 500) said CEO Jamie Dimon was given a $16 million bonus last year, in restricted stock and options.

Market breadth turned mixed after being negative through most of the session. On the New York Stock Exchange, losers topped winners by nine to seven on volume of around 1.56 billion shares. On the Nasdaq, advancers beat decliners seven to six on volume of 2.84 billion shares.

Rally hits a roadblock: The S&P 500 surged 23% in 2009, and 65% after hitting a 12-year low on March 9 of last year. That momentum propelled stocks into the first half of January. But by the second half of the month, the tone had turned more sour and investors had begun to step back.

Between rally highs hit on Jan. 19 and Friday's lows, the S&P 500 lost 9.2%, getting close to the technical definition of a correction - a loss of 10%.

Jobs: Employers cut 20,000 jobs from their payrolls last month, according to a Labor Department report released before the start of trading. Employers had been expected to add about 15,000 jobs, according to a consensus of economists surveyed by Briefing.com.

Employers cut a bigger-than-initially reported 150,000 jobs from their payrolls in December.

The January report had some positive signs, including an increase in the work week and an increase in temp agency employment -- both of which are seen as leading indicators.

But the report also showed that the impact of the recession on the labor market was far worse than initially reported -- making the recovery process all the more arduous.

The unemployment rate, generated by a separate survey, fell to 9.7% from 10% in December. Economists expected it to hold steady at 10%.

Toyota: The troubled company's chief executive apologized Friday for the recall of 8 million cars. However, he did not announce a new recall of the popular Prius Hybrid, despite reports of brake problems.

Earlier, the company said it is also examining the brake systems of the Lexus hybrid vehicles since they used the same system as the 2010 Prius.

Toyota (TM) shares gained 3.5%.

Commodities: COMEX gold for April delivery fell $10.20 to settle at $1,052.80 an ounce, after slumping $49 Thursday.

U.S. light crude oil for March delivery fell $1.95 to settle at $71.19 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.54% from 3.61% late Thursday. Treasury prices and yields move in opposite directions.