NEW YORK (Reuters) – Normally a big decline would set up Wall Street for a technical rebound. But that may not be the case next week, even after the market posted its worst weekly loss for the year and the S&P fell for six straight sessions.

With the corporate earnings season drawing to an end and recent U.S. economic data raising doubts about the pace of growth, the S&P 500, which is down 7.3 percent so far in May, could decline further next week as concerns about the financial health of Europe persist.

“What has changed in the world since April? We went from hearing a constant refrain that the world is awash in money and markets must go higher to hearing nobody wants to take any risk. … All in a week,” said Peter Cecchini, global head of institutional equity derivatives at Cantor Fitzgerald & Co in New York.

The S&P 500 fell 4.3 percent for the week, its steepest weekly decline this year, and closed below 1,300 for the first time in four months.

The hotly awaited market debut of Facebook on Friday was marred by technology glitches on the Nasdaq in sending messages back to the brokerages that handled orders of Facebook Inc (FB.O) for individual, or “retail,” investors. Those problems rekindled fears about the market’s electronic trading system and caused some investors to stay away from equities.

Weighing on sentiment is a growing sense among investors that the euro zone debt crisis is nearing new heights, fueled by fears of the potential for a Greek euro exit and the deteriorating health of the Spanish banking system.

Solid corporate earnings and upbeat U.S. economic indicators had fueled the rally in U.S. stocks, offsetting jitters over Europe. But with earnings almost out of the way and data starting to disappoint, investors have shifted their focus back to headlines out of Europe.

Leaders of the Group of 8 major industrial economies meet this weekend to try to tackle the financial crisis in Europe. U.S. President Barack Obama, the G8 host, has urged European leaders repeatedly to do more to stimulate growth, fearing contagion from the euro crisis that could hurt the U.S. economy and his chances of re-election in November.

“The market is extremely oversold. Nonetheless, all major indicators remain on sell signals,” said Larry McMillan, president of options research firm McMillan Analysis Corp, in a report on Friday.

“We expect a powerful but short-lived rally should be coming soon. But at this point, barring some major shifts in our indicators, it may only be a rally in a larger down-trending market,” McMillian said.

THE FACEBOOK EFFECT

Facebook, the No. 1 online social network, disappointed investors with a tepid market debut on Friday. Shares rose a scant 0.6 percent – nowhere near expectations for double-digit gains on the first trading day – and the day was marred by technical problems due to huge order volume. The stock closed at .23 after falling as low as , its initial offer price.

The disappointing debut curbed investors’ appetite for other social media stocks. Hardest hit was Zynga Inc (ZNGA.O), which closed down 13.4 percent to .16 after falling as low as .40. The stock was temporarily halted twice due to sudden declines.

LinkedIn (NYS:LNKD – News) shares fell 5.7 percent to .02, and Groupon (GRPN.O) fell 6.7 percent to .58. Zynga and Groupon, both of which went public late last year, are also trading below their IPO prices.

Despite the disappointing market debut and the weak performance of social media stocks, market participants are still optimistic about Facebook going forward.

“In any brand new area, social media in this case, most are going to be losers and only some are going to be winners. Yes, the IPO was disappointing, but Facebook is clearly the winner here and others aren’t,” said Randy Warren, chief investment strategist at Warren Financial Service.

Next week’s economic data includes April’s existing home sales on Tuesday at 10 a.m. Existing home sales are forecast at a 4.60 million-unit annual, up from 4.48 million in March.

New homes sales figures are due on Wednesday at 10 a.m. April’s new home sales are also expected to post an increase, gaining about 7,000 units over a 328,000-unit annual rate in March.

Initial jobless claims and durable goods orders will be published on Thursday at 8:30 a.m. Consumer sentiment is due at 9:55 a.m. on Friday.

For the week, the Dow is off 3.5 percent and the Nasdaq is down 5.3 percent.

(Additional reporting by Doris Frankel in Chicago; Editing by Leslie Adler)

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Buy-side anticipation of a huge Day One price pop was high, and yet as of lunch time on Friday, Facebook shares hadn’t crested .

Experienced bankers say that with a new issue of this size, moving the shares beyond the single-digit percentage range can be tough, and that Morgan Stanley (MS – News), the lead bookrunner on the deal, has done an admirable job at keeping the stock trading in relatively stable condition.

GM (GM – News), for instance, which was an .1 billion IPO, only traded a few percentage points above its new issue price on its first day of trading late in 2010. Prior to the first day of trading, bankers said they didn’t expect a more than 10% upsurge on day one, given the deal’s size.

However, with anecdotal reports that some institutional investors got more shares than they were expecting, and new revelations that, according to two people close to the matter, the retail allocation of Facebook IPO shares was more than 20 percent, marking an all-time high for a new issue, some market participants are wondering whether the investor excitement toward the deal was overplayed earlier this week.

(Small investors are the IPO recipients “of last resort,” said one banker who was not directly involved with the deal but has experience with new issues, because they don’t carry a great deal of pricing power and may not hold the stock long term.)

But accounts of the eleventh-hour pricing process from parties close to the matter differ – in some cases starkly. Bankers canvassed investors about the possibility of pricing Facebook (FB – News) at per share on Thursday morning, say several investors and others familiar with the matter, and some investors rebuffed the suggestion, according to some of these people, prompting a return to the price that was ultimately selected.

But other people familiar with the matter say that the rebuffs were few to none, and that it was Facebook CFO David Ebersman’s call to price at a more-conservative per share. The CFO felt strongly about not pricing the IPO too aggressively, say these people, wanting to feel good about the decision over the long term and knowing that more stock would likely need to be sold within the next year.

These people say also that there was always a desire to give small investors a healthy slice of the deal. Apple and other tech stocks have large retail ownership classes, one of these people added, and it makes sense for Facebook to be in line with those.

- By CNBC’s Kate Kelly and Kayla Tausche
@katekellycnbc and @kaylatausche

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SAN FRANCISCO (Reuters) – Facebook Inc shares rose less than expected on their first day of trade on Friday and huge order volume caused technical problems that marred the coming out party of the No. 1 online social network.

Its shares were up 8 percent in early afternoon trading on the Nasdaq, after opening 11 percent higher and then rapidly heading south to touch their initial public offering price of . The gains were below market forecasts of as much as a 50 percent jump.

“We have got some unhappy guys out there,” said Wayne Kaufman, chief market strategist at John Thomas Financial, a retail broker on Wall Street. “They were hoping for Facebook to be considerably better. I bet there are a lot of disappointed people in the market.”

Facebook, which has about 900 million users globally, priced its IPO at the top end of its target range, becoming the first U.S. company to go public with a valuation greater than 0 billion. If a greenshoe option to underwriters is exercised, Facebook will raise as much as .4 billion by selling an 18 percent stake, the second-biggest IPO in U.S. history after the one by Visa Inc.

Analysts blamed the poorer-than-expected first-day showing on the vast number of shares floated and market weakness. General Motors’ decision to pull paid-advertising from the social network, announced this week, also hurt.

After a delay in the opening print that drove up anxiety levels among traders and onlookers outside the Nasdaq, the closely watched stock began trading at .05, rose to as high as and then rapidly retreated. The Nasdaq exchange said it was investigating an issue with execution of trades.

Facebook’s IPO had been heavily oversubscribed, particularly by retail investors, despite concerns about slowing growth in the last quarter, whether the company can make money from mobile advertising, and the immense control Chief Executive Mark Zuckerberg has over on the company.

Others warned that the IPO price, equivalent to over 100 times historical earnings versus Apple Inc’s 14 times and Google Inc’s 19 times, makes Facebook a risky bet.

EARLY FANFARE

For Facebook, Friday began with much fanfare. To rapturous applause from employees, Mark Zuckerberg — flanked by Chief Operating Officer Sheryl Sandberg and Nasdaq Chief Executive Robert Greifeld — rang the bell to kick off trading at the company’s Silicon Valley headquarters at 6:30 a.m. Pacific time.

The 28-year-old billionaire founder, wearing his trademark black hoodie, hugged and high-fived Sandberg and other employees in celebration after he pressed the remote button.

The area outside Facebook’s offices was packed with throngs of photographers, more than a dozen television trucks, and a TV news helicopter hovering overhead as the excitement reached fever pitch.

The fizzling of Facebook’s early gains put pressure on other social media stocks. Zynga, which depends on Facebook for much of its revenue, dived 13 percent before it was halted. LinkedIn Corp was off 3 percent at midday.

“When you see what’s happening with other social media stocks today, which are significantly down, as well as looking at Facebook trading flat, we think it has traded obviously at the high end,” said Destination Wealth Management CEO Michael Yoshikami.

“It’s a rich valuation, particularly given the advertising pressure they’re under now. Advertising revenue has grown significantly slower over the past few years, and that’s punctuated by GM’s decision to stop advertising on Facebook.”

“We’re not buyers at , particularly considering that most of their business is in mobile and they haven’t figured out how to make money yet.”

(Additional reporting by Edwin Chan in San Francisco, Yinka Adegoke, Ed Krudy and Olivia Oran in New York; Editing by Steve Orlofsky and Tiffany Wu)

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Facebook, the world’s most popular social networking company, sold 421.2 million shares for each. At that price, the 503.6 million shares and options Zuckerberg owns are valued at .1 billion, making him wealthier than Google Inc. (GOOG) co- founders Sergey Brin and Larry Page, according to the Bloomberg Billionaires Index.

“Zuckerberg doesn’t think about his wealth,” David Kirkpatrick, author of “The Facebook Effect,” a history of the company, said in an May 17. “This is a huge success for everybody. There’s no way it can be seen otherwise.”

Facebook’s chief executive officer started the Menlo Park, California-based company for Harvard University classmates as a 19-year-old in his dorm room. It now has more than 900 million monthly users and generated .7 billion in revenue in 2011.

Zuckerberg sold 30.2 million shares for .15 billion during the offering. Most of the proceeds will be used to pay the taxes associated with exercising 60 million stock options.

Facebook’s 4.2 billion valuation crystallizes the fortunes of the company’s three other co-founders. Dustin Moskovitz, 27, who roomed with Zuckerberg at Harvard, is now worth .1 billion. He owns 133.7 million shares of the company’s Class B stock, and will sell 7.5 million shares if the underwriters exercise their option to buy additional stock.

Trio of Co-Founders

Moskovitz, the company’s first chief technology officer, left the social network with Facebook colleague Justin Rosenstein in 2008. The duo founded Asana Inc., a task management software company. The company received million in funding from venture capital firms Andreessen Horowitz and Benchmark Capital in 2009, both of Menlo Park.

Eduardo Saverin, 30, has a .7 billion estimated fortune. He owned about 4 percent of the company’s outstanding shares prior to the offering, according to whoownsfacebook.com, which is published by Massinvestor Inc. and draws its information from Facebook’s filings with the SEC, press releases, news reports and other publicly available sources.

The Brazil-born Facebook co-founder renounced his U.S. citizenship last year and is now a permanent resident of Singapore. Saverin’s move could save him million in federal taxes, according to data compiled by Bloomberg.

Saverin declined to discuss his stake in a telephone interview from his home in Singapore.

“I am obligated to and will pay hundreds of millions of dollars in taxes to the United States government,” he said in May 17 statement.

New Republic

Co-founder Christopher Hughes, 28, owns about 22 million shares of Facebook, according to a person familiar with his holdings who asked not to be named because the matter is private. At per share, his stake is worth 6 million.

Hughes, who bought the Washington, D.C.-based magazine the New Republic in March 2012 for less than million, has more than 0 million in cash and real estate after selling some of his Facebook hoard, according to data compiled by Bloomberg. Facebook shares would need to rise 7.9 percent to for Hughes’s fortune to crest 10 figures.

Peter Thiel provided Facebook’s first outside investment: 0,000 in 2004. Today, he has a net worth of .7 billion. The Founders Fund Management LLC partner sold 16.8 million shares during the offering and owns almost 28 million shares of Facebook following the deal, according to regulatory filings.

Thiel, Parker

Thiel, who co-founded PayPal Inc., owns his Facebook shares through holding companies such as Rivendell One LLC and Lembas LLC. He also owns stakes in Palantir Technologies Inc., which makes data processing software, and Valar Ventures Management LLC, a venture fund that invests in New Zealand and Australian companies. The name of each of those entities was inspired by the writings of J.R.R. Tolkien.

Thiel was brought to Facebook by technology entrepreneur Sean Parker, who met Zuckerberg at a Manhattan restaurant in 2004. He persuaded Zuckerberg to move to California to focus on the company full time. The 32-year-old Parker has a .8 billion net worth, and will sell 10 million shares if the underwriters exercise their option to purchase additional shares.

Zuckerberg hired Parker, who had co-founded the Napster Inc. file sharing service with Shawn Fanning in 1999, as its first president. Parker left Facebook in 2005, after police found cocaine at a North Carolina beach house where Parker was hosting friends on vacation. No charges were filed.

For his early role in Facebook, Parker was given almost 70 million shares. He sold 3.65 million shares in the secondary market prior to the company’s IPO.

Sandberg Scores

The offering made Facebook’s chief operating officer Sheryl Sandberg a billionaire. Sandberg, 42, who was lured from Google in 2008, owns 27 million shares, including 25 million restricted stock units that have vested. She also owns more than 14 million unvested units that aren’t counted in her net worth calculation.

At the offering price, her vested stake in the company is worth billion. Sandberg also owns small stakes in Starbucks Corp. (SBUX) and Walt Disney Co. (DIS); she is a director at both companies.

Facebook’s offering further elevated Mark Pincus, the founder of Zynga Inc. (ZNGA), the world’s largest social gaming company, in the billionaire ranks. Pincus, 46, owns 13 percent of Zynga, whose popular online games such as Mafia Wars and Farmville generated more than 10 percent of Facebook’s sales in 2011. Zynga shares are down more than 40 percent since March.

Pincus owns 4.3 million shares of Facebook. With his Zynga stock, he is worth .3 billion. He sold 1 million Facebook shares during the offering, earning him million.

Russian Billionaires

Alisher Usmanov, Russia’s richest man, controls about 80 percent of the 85.6 million Facebook shares owned by investment company Digital Sky, which was founded by Yuri Milner. Digital Sky sold 45.7 million shares in the offering and may sell more in the coming months, according to regulatory filings.

Milner owns about 12.5 percent of the company’s Facebook shares and has a net worth of .1 billion, according to data compiled by Bloomberg. Digital Sky also owns stakes in Zynga, Groupon Inc. and Twitter Inc.

Usmanov — whose most valuable asset is his 50 percent stake in Metalloinvest, Russia’s largest iron ore producer –has never met Zuckerberg.

Facebook, which makes 85 percent of its revenue from advertising, is valued at 25.8 times trailing 12-month sales, more than double Google’s valuation when the search engine debuted in 2004.

The company will begin trading on the Nasdaq today.

To contact the reporters on this story: David De Jong in New York at ddejong3@bloomberg.net; Devon Pendleton in New York at dpendleton@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net

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Facebook, whose deal efforts are being driven by Amin Zoufonoun, raised .84 billion in the IPO yesterday, adding to a billion credit line set up earlier this year and .91 billion in cash holdings. The public market makes shares of the social network easier to use as currency for acquisitions after years of being exchanged on thinly traded private markets.

“I see them making acquisitions across the spectrum, big and small — and they should be,” said Maha Ibrahim, a partner at venture capital firm Canaan Partners in Menlo Park, California. “They have the heft, and now they just need to monetize even better than they’re doing.”

Facebook, whose shares will begin trading today, could use acquisitions to bulk up its business in areas such as mobile, advertising, payments and video-sharing. While Zuckerberg has pursued mostly small takeovers in the past, the Instagram deal demonstrated that the company is willing to make larger purchases of established companies, said Brian Wieser, an analyst at Pivotal Research Group LLC in New York.

“I expect we will continue to be surprised by the scale of some of these acquisitions,” Wieser said. “I previously did not expect much in the way of meaningful acquisitions.”

Expanding Deal Team

Zoufonoun, Facebook’s director of corporate development, reports to Vice President Vaughan Smith. Zoufonoun was at Google Inc. for about eight years before arriving at Menlo Park-based Facebook last year. The company is expanding its team working on deals, with at least three open positions in business development, according to Facebook’s website.

Even before the IPO, the company’s coffers were growing. Facebook amassed .91 billion in cash and short-term investments on its balance sheet through the end of the first quarter, according to a filing with the U.S. Securities and Exchange Commission. In March, Facebook said investment banks, including Morgan Stanley and JPMorgan Chase & Co., arranged an billion financing package, including a billion credit line to be used for working capital and other general corporate purposes, and a billion bridge loan to fund taxes for employees who exercise restricted stock units.

In the wake of the IPO, Facebook has said it will need to spend an estimated .4 billion to cover such taxes. The units can’t be sold until about five months after the IPO.

Including shares sold by investors, the total IPO proceeds were billion.

Google’s ‘Treasure Chest’

For now, Zoufonoun can put the IPO windfall to work and help Facebook intensify its challenge to rivals such as Google, according to Sameet Sinha, an analyst at B. Riley & Co.

There are a lot of other cash-rich tech companies vying for deals. Microsoft (MSFT) Corp. has .5 billion in cash and short-term investments. Apple Inc.’s war chest has swollen to 0.2 billion — though it hasn’t been an active acquirer. More likely, Facebook will go up against Google, which had .3 billion in cash and short-term securities at the end of March.

“They need to compete against Google’s treasure chest,” Sinha said. “You’re fighting with so many big players in so many big industries.”

Acquiring online advertising companies could fill a need at Facebook, especially for extending ads outside of the site, Sinha said. If the company were seeking to bolster that effort, ValueClick Inc. or one of Microsoft’s ad-technology businesses could be a target, Sinha said. To shore up e-commerce offerings, Facebook could buy a shopping startup, such as social-buying service Payvment Inc., or an online-payment provider, he said.

Viddy, Socialcam

Building on the Instagram deal, Facebook may go after a social-video sharing service like Viddy Inc. or Socialcam Inc., said Arvind Bhatia, an analyst at Sterne Agee & Leach Inc. And while there are plenty of targets in the U.S., buying or investing in a China-based technology company would help Facebook finally make its way into the country, he said.

Media companies, including music providers, may also be on Facebook’s wish list, Pivotal’s Wieser said. Potential targets may include Spotify Ltd., which already uses the Facebook platform to reach users, and online radio pioneer Pandora Media Inc. (P) , which had a market value of .74 billion yesterday.

Still, it’s unlikely Facebook will just build up a portfolio of content companies, said Rebecca Lieb, a digital- media analyst at Altimeter Group in New York. The social network will probably continue to let such providers run on its platform while remaining independent, she said.

No ‘Shopping Spree’

“The IPO will not be the moment when Facebook gets daddy’s credit card and goes on a shopping spree,” Lieb said. “Their purchases will be judicious, especially for a company that has not made a ton of acquisitions in the past.” She said data- management software may be an attractive industry as Facebook seeks to handle the information streaming in from its more than 900 million users.

Jonathan Thaw, spokesman for Facebook, declined to comment, as did representatives of Microsoft, ValueClick, Payvment, Viddy and Spotify. An e-mail sent to Socialcam CEO Michael Seibel wasn’t returned.

Beyond targeting companies for acquisitions, Facebook is also spending on bolstering its cache of intellectual property. In April, Facebook said it would pay 0 million to buy about 650 patents and applications from AOL Inc., as well as a license to AOL patents and applications that Microsoft will purchase and own.

Data Centers

To accommodate its swelling user base and the reams of data members upload to its site daily, Facebook plans to spend billions of dollars over the next five years to boost its capacity and build data centers. In a filing, Facebook said capital expenditures will be .6 billion to .8 billion this year. The company’s capital spending may rise to .2 billion in 2017, Pivotal’s Wieser wrote in a May 4 research note.

“The company needs one new major data center each per year beyond those currently committed in Oregon, North Carolina and Sweden,” Wieser wrote. Facebook may want to build centers in China or Australia, said Virginia Agee, a research director at IDC.

Facebook has made more than 30 purchases or talent acquisitions — deals made mainly to gain a company’s engineers or staff. One of the most recent was Glancee, a startup that helps users make new friends based on their locations. The 2009 acquisition of social-media aggregator FriendFeed brought over Bret Taylor, who later became Facebook’s chief technology officer.

‘Complementary Companies’

“As part of our business strategy, we have made and intend to make acquisitions to add specialized employees, complementary companies, products, or technologies,” Facebook said in its IPO filing.

Still, at the time of the Instagram announcement, Zuckerberg cautioned against reading too much into the size of the purchase, which is set to close later this year.

“It’s the first time we’ve ever acquired a product and company with so many users,” he said in an online post in April. “We don’t plan on doing many more of these, if any at all.”

With the addition of cash from the IPO and the ability to issue shares for an acquisition, Sterne Agee’s Bhatia said he expects Facebook to move quickly with an acquisition in cases where it would take too long to catch up on its own.

“If it’s going to take them some time to develop something that’s becoming popular, they will try to bring that in-house,” he said.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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LONDON (Reuters) – The U.S. dollar climbed, world shares fell and German borrowing costs hit record lows on Friday as a deepening Spanish banking crisis, uncertainty about Greece’s future in the euro zone and lackluster U.S. data provoked a rush for safe-haven assets.

World stocks, as measured by the MSCI index, <.MIWD00000PUS> dropped 0.85 percent and are now below where they began the year, having relinquished all their first quarter gains which were fuelled by the European Central Bank‘s creation of more than a trillion euros of three-year money.

That rally is now a distant memory as an ugly week for stock markets looked likely to end even uglier.

Across the board, riskier assets from commodities such as gold and oil and currencies like the euro and the Australian dollar were all heading for big weekly losses.

The FTSEurofirst 300 (.FTEU3) of leading European shares slid 0.9 percent to 972.69 by 4 a.m. EDT, falling for a fifth day running and taking its weekly loss so far to five percent.

Benchmark 10-year German bond yields hit a record low of 1.396 percent and two-year yields also fell to their lowest-ever level at just 0.028 percent.

Investors were spooked by a ratings downgrade of 16 Spanish banks by Moody’s Investors Service, although the move had been expected, and an unexpected contraction in U.S. regional factory activity reported on Thursday.

Sentiment has soured to the extent that an opinion poll showing Greeks are returning to the establishment parties which support the country’s bailout, had little impact.

If they vote that way in the June 17 elections, Greece’s place in the euro zone would look more secure and the threat of contagion engulfing countries such as Spain would diminish.

“European markets are still in a very fatalistic mood because of Greece and possible contagion,” said Lex van Dam, hedge fund manager at Hampstead Capital, which manages 0 million of assets. “My view is that it is very likely that the ECB will step in before the situation spirals out of control, which will support the markets.”

The safe-haven dollar rose against a basket of major currencies to hit a four-month high of 81.758 (.DXY), while the euro marked a four-month low around .2649.

Greece has captured the headlines in recent days but the much larger Spanish economy poses an equal threat.

Spain’s banks, saddled with bad loans after a property boom collapsed, may need a bailout that would strain Madrid’s already stretched finances and possibly require an international bailout regardless of any contagion threat from Greece.

Spanish and Italian 10-year borrowing costs rose and are both now above the six percent level which investors view as a pivot point that could accelerate a climb to 7 percent, a cost of borrowing widely seen as unaffordable. (GVD/EUR)

CATALOGUE OF YEAR LOWS

MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 3 percent to its lowest this year and was on track for its worst weekly performance in nearly eight months with a loss exceeding 6 percent this week.

The index has shed more than 11 percent in May, wiping out all its gains for the year.

As risk aversion intensified, the CBOE VIX Volatility index (.VIX) – a gauge of investors’ anxiety that measures expected volatility in the Standard & Poor’s 500 index (.SPX) over the next 30 days – rose nearly 1 percent to close at a five-month high on Thursday.

Brent crude slipped below 7 per barrel on Friday to its lowest in 2012 as the euro zone crisis and weak U.S. data raised fears of a global slowdown that could dent oil demand. (O/R)

Gold, the traditional safe haven, reversed course and edged down after posting its biggest daily rise in more than three months the previous session. (GOL/)

“We’ve got a bit of a perfect storm at the moment,” Michael McCarthy, a markets strategist at CMC Global Markets in Sydney said.

(Additional reporting by Tricia Wright, Florence Tan,; Editing by David Stamp)

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NEW YORK (Reuters) – Stocks hit a four-month low on Thursday as rising Spanish bond yields increased investor anxiety over that country’s banks and another round of weak data undermined hopes for U.S. economic recovery.

Growing worries over developments in the euro zone and lackluster economic data pushed the S&P’s losing streak to five consecutive days. The index, which closed at a level not seen since mid-January, has now relinquished more than half of its gains from the first quarter.

“There is not a lot of interest in the equity market,” said Jason Weisberg, managing director at Seaport Securities Corp in New York. “The overhang with Europe is so heavy, people are tired of playing whack-a-mole, and their portfolios are the mole.”

The Dow Jones industrial average (DJI:^DJI – News) dropped 156.06 points, or 1.24 percent, to 12,442.49. The Standard & Poor’s 500 Index (MXP:^GSPC – News) fell 19.94 points, or 1.51 percent, to 1,304.86. The Nasdaq Composite Index (NAS:^COMP) lost 60.35 points, or 2.10 percent, to 2,813.69.

Caterpillar Inc (NYS:CAT – News) dropped 4.5 percent to .77 as the biggest drag on the Dow after the heavy equipment company’s dealers reported slowing sales for April. [ID:nL1E8GH5OK] The Dow declined for an eleventh session in the past 12.

A gauge of future U.S. economic activity fell in April for the first time in seven months, and the Philadelphia Federal Reserve‘s index of business conditions hit its lowest since September.

In addition, the weekly claims for jobless benefits showed no improvement, a sign the pace of hiring remains lackluster.

Spain’s El Mundo newspaper reported that customers at troubled Spanish lender Bankia had withdrawn more than 1 billion euros over the past week, a report which the Spanish government denied.

Adding to concerns about the region, Spain’s borrowing costs shot up at a bond auction. Bankia shares (MCE:BKIA.MC – News) fell 14 percent in European trading after sliding as much as 30 percent earlier.

News that some Greek banks face emergency funding needs hurt sentiment and caused a further decline in risk assets, which have dropped over recent weeks. The CBOE Volatility Index (.VIX) jumped 9.3 percent and hit its highest level since mid-December.

With a pattern of brief gains during recent trading sessions fizzling quickly, bulls saw little reason to fight the selling pressure.

“Everyone is inclined to sell into rallies rather than buy into dips, find any excuse to sell,” said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.

After the closing bell, Gap Inc (NYS:GPS – News) shares jumped 6 percent to .89 after the clothing retailer reported first-quarter earnings that topped Wall Street expectations and boosted its yearly profit forecast.

Facebook Inc (FB.O) priced its initial public offering at per share, giving the world’s No. 1 online social network a 4 billion valuation in the third largest offering in U.S. history. The stock begins trading on Friday on the Nasdaq.

The Nasdaq fell on weakness in tech shares. Apple Inc (NSQ:AAPL – News) lost 2.9 percent to 0.12 and Qualcomm Inc (NSQ:QCOM – News) fell 3.3 percent to .16.

Dollar Tree (NSQ:DLTR – News) fell 6.1 percent to .13 and was one of the biggest percentage decliners on the Nasdaq 100 (NAS:^NDX – News) after giving a second-quarter profit outlook that was below expectations.

The S&P has fallen 6.1 percent so far in May, and while volatility is expected to continue, the persistence of the losses have some analysts forecasting a near-term rebound.

Wal-Mart (NYS:WMT – News) shares advanced 4.2 percent to .68 after the world’s largest retailer reported better-than-expected quarterly profit.

Sears Holdings Corp (NSQ:SHLD – News) gained 3.1 percent to .42 after the company said it plans to spin off a large part of its stake in its Canada unit to better focus on its U.S. business.

GameStop Corp (NYS:GME – News) tumbled 11.1 percent to .52, the biggest percentage decliner on the S&P, after it forecast second-quarter earnings that were below expectations.

Volume was heavy with about 8.35 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.81 billion.

Declining stocks outnumbered advancing ones on the NYSE by 2,652 to 412, while on the Nasdaq, decliners beat advancers 2,021 to 483.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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NEW YORK/SAN FRANCISCO (Reuters) – Facebook Inc priced its initial public offering at the top of its target range to raise more than billion, as strong demand, particularly from retail investors, fuels anticipation of a big pop in the stock when it begins trading Friday on the Nasdaq.

Predictions of how much the stock will rise on its first day of trade vary greatly — some experts said the high IPO price and increased float could limit gains to 10 percent to 20 percent, while others said anything short of a 50 percent jump would be disappointing given the hype.

“I think anything over 50 percent will be considered a successful offering — anything under that would be underwhelming,” said Jim Krapfel, analyst at Morningstar. “A lot of retail investors are not concerned about valuation. That’s what is going to drive the first day pop.”

Facebook is selling a 15 percent stake priced at a share, giving the world’s largest online social network a valuation of 4 billion.

That puts the eight-year-old company, founded in a Harvard dorm room by Chief Executive Mark Zuckerberg, a valuation akin to that of Amazon.com Inc and exceeding that of Hewlett-Packard Co and Dell Inc combined.

In an event that many say is as much a cultural phenomenon as it is a business story, Facebook will make its Wall Street debut at around 11 a.m. on Friday on the Nasdaq.

Investor enthusiasm for Facebook shares comes despite questions about the company’s long-term money-making capabilities, particularly after it reported a quarter-to-quarter revenue slide in April.

“Hundreds of millions of people are extremely passionate about this product. A lot of those people want to be a part of this event, of this company that they have an affinity for. That’s creating a level of excitement for the stock that you don’t normally see,” said Steve Weinstein, an analyst with ITG Research.

Facebook, with some 900 million users, raised the target IPO price range on Tuesday to between and per share, from between and . More than half of the proceeds of the offering will go to existing shareholders, including early backers such as Accel Partners and Russia’s DST Global.

Facebook could raise north of .4 billion if a greenshoe option for underwriters is exercised, making the IPO the second-largest in U.S. history, after that of Visa Inc.

Some investors expected Facebook to price the offering at per share. However, the Nasdaq Composite Index fell by more than 2 percent on Thursday, quelling such speculation.

“It probably would have gone at if the market was not horrible,” said Scott Sweet of research firm IPO Boutique. “I expect it to open at a nice premium, but I don’t expect a LinkedIn-type performance because of the sheer size of this IPO. They have to move a lot of stock and there will be a lot of selling.”

Shares of professional networking company LinkedIn Corp doubled on their first day of trading.

Lee Simmons, industry specialist at Dun & Bradstreet, forecast a 10 percent to 20 percent gain for Facebook on Friday.

“You’ve got a large offering at an increased price, so a huge pop may be difficult to achieve,” Simmons said. “When you’re talking about doubling or a pop the size of LinkedIn, it’s more difficult to achieve because Facebook is just offering more shares … The others were smaller floats, under 10 percent, so you had this artificial feeding frenzy.”

On Wednesday, Facebook increased the size of the IPO by almost 25 percent to 421 million shares, a 15 percent float. The greenshoe, if exercised as expected, would expand the float to 18 percent.

Another social media company, Zynga Inc, an online games developer that makes lots of games for Facebook users, fizzled in its debut and ended down 5 percent on its first day of trading. No one Reuters spoke with said Facebook’s stock would fall on Friday.

CHALLENGES REMAIN

Facebook will celebrate its Wall Street debut with an all-night “hackathon” at its Menlo Park, California, headquarters starting on Thursday evening, a company tradition in which computer programmers work on side projects that sometimes turn into mainstream offerings.

Despite the high expectations, Facebook faces challenges maintaining its growth momentum.

Some investors worry the company has not yet figured out a way to make money from the growing number of users who access Facebook on mobile devices such as tablets and smartphones. Meanwhile, revenue growth from Facebook’s online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.

Would-be investors have been warned by some financial advisers against jumping into Facebook right away, but the well-known brand could still attract enough interest to exceed the 458 million shares traded the day General Motors went public after emerging from bankruptcy in 2010.

One UBS adviser initially received calls from 12 clients clamoring to buy shares of Facebook, but over the past couple of weeks, two have changed their minds.

“A lot of people are thrown off by the recent negative stories in the press,” the adviser said, speaking on condition of anonymity. “One guy was worried about General Motors stopping its advertising on Facebook.”

GM said on Tuesday it would stop placing ads on Facebook, raising questions about whether the display ads on the site are as effective in reaching consumers as traditional media.

Overall, financial advisers are struggling to manage clients’ expectations about what the stock will do and in some cases, if they will be able to get any stock for them.

“People want to just own it because they think it’s the next Google and they missed out on that,” said a financial adviser from Wells Fargo Advisors, the brokerage division of Wells Fargo & Co, which is part of the syndicate underwriting the deal.

Facebook has 33 underwriters for the IPO, led by Morgan Stanley, JPMorgan and Goldman Sachs.

(Additional reporting by Jessica Toonkel and David Gaffen in New York, Alexei Oreskovic and Edwin Chan in San Francisco; Editing by Tiffany Wu, Phil Berlowitz and Steve Orlofsky)

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