VIOLENCE AND FEAR OF FINANCIAL crises abroad cast a shadow on trading at home last week, but it wasn’t long enough to depress the U.S. market severely.

North Korea’s deadly attack on the South Korean island of Yeonpyeong—170 rounds in all—seemed nothing short of an act of war, though propagandists for the North’s dictator, Kim Jong Il, thought it best to release a photo of him surveying bottles of soy sauce. Police in Rio de Janeiro battled shantytown gangs, which might have made more headlines in a week without the Thanksgiving holiday. At center stage was Ireland’s sovereign-debt bailout of roughly 85 billion euros (U.S. $113 billion), and fears that Portugal and Spain will be next.

The euro dropped 3% on the week, to $1.32, though that’s nowhere near the low of $1.19 it reached earlier this year when the currency’s future was being called into question.

U.S. market indexes mostly slumped, with the Dow Jones Industrial Average down 1% to 11,092 for the four trading sessions, with Friday’s put to bed after a half-day. The Standard & Poor’s 500 Index fell 0.9% to 1189.40. But the Nasdaq Composite showed signs of life, rising 0.7% to 2534.56, as did the components of the Russell 2000 index, which gained 1.2%.

Financial stocks posted the biggest decline for the week as investors shied away from risky assets. Oil and gas shares also didn’t do well, though oil prices rose nearly 3% for the week to more than $86 per barrel. Natural gas prices shot up 5.6% to nearly $4.40 per million British thermal units.

“The reason the stock market didn’t fall more this past week is that there is a perception that while these are large problems, it’s likely European officials will expand their bailout facilities, and the ECB will come in and buy some of these government securities to stabilize the market,” said Ed Yardeni, chief investment strategist at Yardeni Research based in Brookville, N.Y. “Clearly the bond vigilantes have gone from getting riled up about Ireland to now focusing on Portugal and Spain, and the question is if European authorities can re-establish some order in the capital markets.”

The European Commission suggested doubling the size of Europe’s €440 billion bailout fund, an idea promptly dismissed by Germany. Eurozone members are likely to push for some kind of rescue package in Portugal to restore market confidence and preempt further instability, according to Eurasia Group analysts. In Spain, the government insists it can slash deficits, though its rising bond yields last week underscored fear about unemployment and low productivity (Source: Barrons Online).