Foreign intrigue scuttled what might have been a positive day for bank stocks on Friday.

The KBW Bank Index was higher at midday on solid domestic news when the markets were spooked by a report that a South Korean naval ship had sunk near the border with North Korea. Investors turned into sellers and the index finished the day down 0.25%. The Dow Jones industrial average eked out a 0.08% rise and the Standard & Poor's 500 index edged up 0.07%.

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