Wall Street set to bounce as S&P faces key test

Wall Street stocks were set to bounce back on Friday after Europe's debt crisis drove heavy market losses this week, with the S&P 500 falling through important technical levels and possibly facing another key test of strength.

Selling on Thursday afternoon pushed the S&P 500 through a support level at around 1,230. The next key test will be whether the index can hold its 50-day moving average just above 1,200, possibly setting the stage for a bounce if it does.

Growing concerns about Europe's debt crisis have set U.S. stocks up for their worst week in two months.

Euro zone and International Monetary Fund officials have discussed the idea of the European Central Bank lending to the IMF so it has sufficient resources to bail out even the biggest euro zone sovereigns, Reuters reported Thursday.

It's light volume, so it's hard for us to put credence in a bounce off of yesterday's lows, said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey. We are trading off European headlines, what's going to happen with the EU and reaction to Spanish bonds rebounding.

European sovereign debt yields, an important risk barometer for investors, eased from recent highs while the euro firmed. The yield on the Spanish 10-year, a recent focus of investors' concerns, fell back to 6.44 percent after rising above 7 percent earlier in the session.

But global equities remained under pressure. European shares were off their lows but still down 0.2 percent, while Japan's Nikkei stock average closed down 1.2 percent to it lowest in more than a month.

S&P 500 futures were up 10.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures gained 83 points, and Nasdaq 100 futures rose 12 points.

The S&P 500 is down 3.8 percent this week. That would be its worst weekly run since late September.

As risk assets begin to pull back or pause, many are quickly moving back to important trading support near 50-day moving averages, Robert Sluymer, a technical analyst at RBC Capital Markets in New York, said in a note. This sets the stage for another rebound to develop in the coming few days or week.

In another crisis flashpoint, Greece's national unity government will submit a 2012 austerity budget to parliament on Friday, its first task in meeting the terms of an international bailout, but a rift widened between the coalition's main parties.

The crisis comes at a time when the U.S. economy is gaining steam as factories produce more cars and slowing inflation relieves pressure on spending power. That is putting the country on a stronger footing to resist an economic storm gathering over Europe.

H J Heinz Co reported lower quarterly profit early Friday, but the company stood by its full-year forecast. The shares fell 2.5 percent to $51.50 in light premarket trade.

Shares in Blue Coat Systems Inc were up nearly 20 percent to $20.16 premarket after the maker of Internet-monitoring gear reported results late Thursday. However, Salesforce.com Inc fell 4.8 percent to $120.01 after it posted a quarterly net loss.

(Editing by Jeffrey Benkoe)