By Edward Krudy

NEW YORK (Reuters) – Stocks headed for three days of losses on Friday on worries about the Italian banking sector and Greece’s austerity plan, but the S&P 500 managed to hold its 200-day moving average in a sign of market strength.

Italian banks UniCredit SpA (Milan:CRDI.MI – News) and Intesa Sanpaolo (Milan:ISP.MI – News) fell sharply on concerns about their capital positions alongside uncertainty about the euro-zone crisis. Trading in the banks’ shares was briefly suspended.

Greece’s government faced an electorate vehemently opposed to austerity measures that must be passed in parliament next week to avert default. But progress is being made in persuading banks to take part in a second bailout.

“They (politicians) may not believe that financial markets are as sensitive to their decisions as they actually are, and there is a worry that somewhere along the line, some political vote goes against the market,” said Nicholas Colas, chief market strategist of the ConvergEx Group in New York.

The S&P 500 remained within striking distance of its 200-day moving average — a line that has been tested twice in recent trading and has so far acted as a springboard for stocks. The level was at 1,263.49.

“Every time you test a resistance or support level, you make it weaker,” Colas said. “It’s almost like a piece of metal. Every time you hit it, it grows more fragile and that’s why people are really worried the third or fourth time.”

The Dow Jones industrial average (DJI:^DJI – News) dropped 82.04 points, or 0.68 percent, to 11,967.96. The Standard & Poor’s 500 Index (^SPX – News) fell 10.82 points, or 0.84 percent, to 1,272.68. The Nasdaq Composite Index (Nasdaq:^IXIC – News) lost 26.51 points, or 0.99 percent, to 2,660.24. For more visit: Yahoo Finance

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