US stocks close down after bad week

The worst week for the US stock market in two months ended with a whimper in thin trading today.

The Dow Jones industrial average lost 4.8% this week, while the broader Standard & Poor’s 500 index fell 4.7%. Both had their worst weeks since September 23.

Major indexes wavered throughout today’s session, which was shortened because it is the day after Thanksgiving.

Worries about Europe’s debt crisis flared up again after Italy had to pay 7.8% to borrow for two years at a debt auction. It is another sign that investors are increasingly hesitant to lend to European countries.

The euro lost 2% against the dollar this week. The drop puts the euro at its lowest level since October 4.

Higher interest rates on government debt of Italy, Spain and other European countries have rattled stock markets in recent weeks. When borrowing costs climb above the 7% threshold, it deepens investor fears about a government’s ability to manage its debts. Greece, Ireland and Portugal had to seek financial lifelines when their interest rates crossed the same mark.

The Dow fell 25.77 points, or 0.2%, to close at 11,231.78. Of the Dow’s 30 stocks, Chevron lost 1.6% today, the biggest drop. Travelers Cos Inc added 1.2%, the largest gain.

The S&P 500 lost 3.12 points, or 0.3%, to close at 1,158.67. The Nasdaq composite dropped 18.57, or 0.8%, to end on 2,441.51.

Trading volume was 1.6 billion, less than half the daily average.

Markets were battered this week as governments in Europe and the US struggle to tackle their debts. The Dow lost 248 points on Monday as a Congressional committee failed to reach a deal to cut federal budget deficits. It plunged 236 points Wednesday after investors balked at buying German government debt.

Retailers traded mixed today, the Friday after Thanksgiving and the traditional start of the holiday shopping season. This is usually the busiest day of the year for retailers. Amazon. dropped 3.5%. Wal-Mart Stores inched up 0.4%.

A record number of people were expected to show up at stores this weekend to take advantage of deep discounts. The National Retail Federation estimates that 152 million Americans will go shopping over the three days starting today. That would be an increase of 10% on last year.

AT&T’s stock dipped less than 1%. The company said it is budgeting to pay 4 billion in break-up fees if its attempted 39 billion takeover of T-Mobile USA from Deutsche Telekom falls apart.

Four stocks fell for every three that rose on the New York Stock Exchange.