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Stocks pull back on China growth concerns

Updated at 10:25 a.m. ET: Stocks pulled back Friday after a far weaker-than-expected rate of growth in Chinese exports, but the S&P 500 was still on track to post its fifth straight week of gains.

Trade and new bank lending data in China suggested pro-growth policies have been slow to gain traction and more urgent action may be needed to stabilize the economy.

"The data was not bad, it was horrendous," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"This Chinese data is probably going to stall the market for a while and we may have a problem getting back above 1,400" on the S&P 500, he said.

The S&P 500 closed Thursday at its highest in more than three months and above 1,400 for a third day as investors continue to bet a soft global economy will trigger intervention from central banks including the Federal Reserve.

The recent rally was triggered by expectations the European Central Bank will soon act to lower yields in Spain and Italy as a way to stabilize the bloc's economy. The drop in Chinese export growth was in part due to slow demand from Europe.

"China's export problem is an external problem and it has to do with Europe," said Mendelsohn. "After these numbers investors may want to see (stimulus) activity fairly quickly, especially from the ECB."

The expectation of central bank action may give support to equities as investors think twice about shorting the market on the possibility of any action over the weekend.

J.C. Penney shares were lower after it reported a deeper-than-expected drop in quarterly sales at stores open at least a year.

Yahoo shares fell a day after the company said it may reconsider what it does with the cash it gets from a multibillion-dollar sale of half of its stake in Alibaba Group. Yahoo previously promised to return most of the cash to shareholders.

Research In Motion's U.S.-traded shares rose after Bloomberg reported IBM Corp has considered buying RIM's enterprise division.

Fusion-io Inc shares jumped after it projected late Thursday strong growth over the next year and handily beat fourth-quarter profit estimates.

Manchester United's initial public offering priced well below its expected range on Thursday, valuing the British soccer club at only $2.3 billion and shaving off as much as $100 million from the anticipated proceeds for the team and its owners. Shares start trading Friday on the New York Stock Exchange.

Reuters contributed to this report.