Stocks briefly cut losses on Friday as investors scoured the market for beaten-down shares following the S&P 500's <.SPX> earlier drop to a 12-year low.

News that the U.S. government is taking a large common equity stake in embattled lender Citigroup sowed more uncertainty over the fate of major banks.

The Dow Jones industrial average <.DJI> was down 37.03 points, or 0.52 percent, at 7,145.05. The Standard & Poor's 500 Index <.SPX> was down 7.86 points, or 1.04 percent, at 744.97. The Nasdaq Composite Index <.IXIC> was down 2.16 points, or 0.16 percent, at 1,389.31.

(Editing by James Dalgleish)