Updated at 3:01 p.m. ET

Stocks trimmed earlier deep losses after results of a stress test on Spain's banks showed them to be mostly solvent.

The Dow Jones Industrial Average ($INDU) was down 43 at 13,442 after having fallen more than 100 points early in the session. The S&P 500 ($INX) was down 5 at 1,442. The Nasdaq Composite ($COMPX) was down 13 at 3,124.

The results indicate the banks' recapitalization needs amount to 59.3 billion euros ($76.3 billion), the Bank of Spain and the Economics Ministry announced. The results came in line with analysts expectations, MarketWatch reported. "The results confirm that the Spanish banking sector is mostly solvent and viable, even in an extremely adverse and highly unlikely macroeconomic setting," the joint press release said.

Markets are still watching for a potential downgrade of Spanish sovereign debt by Moody's Investors Service either late Friday or late Sunday.

All these steps are crucial for when the country asks for aid. European stocks were higher earlier Friday in response to Spain's budget announcement but quickly turned negative later in the session.

On Thursday, U.S. stocks snapped a four-day losing streak after an upbeat jobless claims report and a Spanish austerity plan that focuses on spending cuts instead of tax increases. The plan aims for $16.7 billion in budget cuts. The Spanish government said it expects to meet the 2012 budget deficit goal of 6.3% and set a deficit target of 4.5% for 2013. Borrowing costs in Spain eased after the announcement.

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Asian stocks were mostly higher on the last day of the third quarter, with investors encouraged by Spain's budget plan and hopeful that the Chinese government will take steps to stimulate the economy. Japanese stocks, though, declined on weak monthly industrial production data and amid concerns about the fallout from the country's territorial dispute with China.

US spending, income barely rise
Consumer spending in the U.S. rose in August by 0.5%. Although that was the most in six months, when adjusted for inflation, spending barely rose 0.1%. Even that small increase reflects mostly rising gasoline prices. Consumer spending accounts for about 70% of economic activity in the U.S., so such a slow rate of spending growth isn't encouraging for GDP growth.

Personal income also rose just 0.1%, and, with inflation and taxes factored in, income fell 0.3%.

Since spending rose faster than income, the U.S. savings rate fell to 3.7% from 4.1% -- the biggest one-month decline in a year. Also, the core PCE price index inflation gauge rose a scant 0.1% in August. Over the past 12 months the core PCE has risen 1.6%, within the Federal Reserve's preferred zero-to-2.0% range.

Business activity in the U.S. unexpectedly contracted in September for the first time in three years. The Institute for Supply Management said its Chicago purchasing managers index fell to 49.7 in September from 53 in August. Any reading below 50 indicates contraction. This is the lowest level in three years. Economists had expected a much smaller decline to 52.9, according to Briefing.com.

Consumer sentiment rose to 78.3 in September from 74.3 in August, according to reports on the University of Michigan-Thomson Reuters consumer sentiment gauge. While sentiment rose to its highest level in four months, it was much lower than a preliminary September reading of 79.2 and economists expectations of 79. The sentiment gauge averaged about 87 in the year before the recession.

Stocks to watch

Research In Motion (RIMM) shares surged after the BlackBerry maker reported better-than-expected​ sales late Thursday. The company reported an adjusted loss of 27 cents a share, which was much better than the loss of 47 cents per share analysts were expecting, according to FactSet. CEO Thorsten Heins also said Friday on CNBC that RIM will first release a new touchscreen version when the BlackBerry 10 goes on sale in the first quarter of 2013.

Bank of America (BAC) has agreed to settle a class-action lawsuit with with investors who suffered losses after its 2009 Merrill Lynch acquisition for $2.43 billion. The bank will incur charges related to the litigation that will cut third-quarter earnings per share by about 28 cents. The company also said it will institute certain new corporate governance policies as part of the settlement.

Nike (NKE) shares fell after the maker of athletic shoes and apparel reported adjusted earnings of $1.27 per share, which topped analysts estimates of $1.12 per share, according to Thomson Reuters. The problem was that Nike reported narrower fiscal-first-quarter​ gross profit margin as well as higher costs for raw materials and labor.

Walgreen (WAG) reported that adjusted fiscal-fourth-quarte​r net income slipped to 63 cents a share from 66 cents in the year-earlier period but topped analysts' estimates of 55 cents a share. Sales decreased to $17.07 billion, from about $18 billion. Walgreen said it expects growth in the coming year as it re-enters the Express Scripts pharmacy provider network.

McDonald's (MCD) shares dropped after the fast-food chain was downgraded to "neutral" from "buy" at Janney Montgomery. The 12-month share-price estimate is $100.

Facebook (FB) announced a gifts program that is expected to help with monetization. The social network also integrated its service with the Dropbox file storage and sharing service.

Sony (SNE) agreed to put 50 billion yen, or about $644 million, into Olympus in exchange for an 11.4% stake, the companies said Friday.