Meanwhile, investors traded with caution ahead of Friday's release of U.S. growth data in the October-December quarter.

Japan's benchmark Nikkei 225 stock average lost 96.69 points, or 0.9 percent, to 10,381.97 in the morning session. Investors dumped shares in banks, which own large amounts of government bonds.

Mitsubishi UFJ Financial Group, Japan's biggest bank, fell 3 percent to 432 yen ($5.2). Mizuho Financial Group, Japan's No. 2 banking group, declined 3 percent to 159 yen. Sumitomo Mitsui Financial Group was down 2.3 percent at 2,851 yen.

Australia's S&P/ASX 200 was down 0.5 percent at 4,884.10. South Korea's Kospi declined 0.7 percent to 2,099.62.

Standard & Poor's slashed Japan's credit rating for the first time in almost nine years Thursday, issuing a harsh critique of the government's ability to control its ballooning debt.

First-time applications for unemployment rose to 454,000, the highest level since late October. Economists had expected the number to rise to 407,000. Snowstorms in some parts of the country forced companies to lay off workers, economists said.

Caterpillar Inc. rose 0.8 percent after its fourth-quarter profit quadrupled on strong global demand for mining and construction equipment. Time Warner Cable Inc. gained 2 percent after raising its dividend thanks to a 22 percent jump in income last quarter.

AT&T Inc. fell 3 percent, the largest drop in the 30 companies that make up the Dow Jones industrial average. The company reported that new wireless contracts fell to the lowest level in more than five years.

Procter & Gamble Co., the maker of consumer products like Tide detergent, fell 2.9 percent after it failed to meet analyst's expectations.

The Dow Jones industrial average inched up 2 points, or less than 0.1 percent, to 11,987. The index broke through the 12,000 mark yesterday for the first time since June 2008 before slipping in the late afternoon.

Bank of America Corp. intends to give some investment bankers a greater share of their bonuses in cash, the latest Wall Street compensation move roiling banking chieftains as they meet in Davos, Switzerland.

Last year the highest-paid bankers at the nation's largest bank by assets received as little as 5% of their payout in cash. Now bankers and traders making more than $5 million are getting as much as 30% of their 2010 compensation in cash and at least 70% in deferred stock, according to people familiar with the situation. Some could see a stock award of as much as 80% and 20% in cash.

Last year's level of cash was unusually low because the bank was restricted by federal pay rules as a condition of the $45 billion it received in U.S. aid.

"We feel that our pay practices are fair and appropriate for our employees and our shareholders," a spokesman said.

Still, multiple bankers gathered at the World Economic Forum in Davos grumbled that Bank of America would increase the cash portion of bonuses—news that traveled fast once the bank's employees were told.

Goldman's move shows how banking has become so international that companies can sidestep the SEC's rules with ease. It also shows that the commission's rules regarding stock sales are crippling for U.S. investors.

Facebook will raise just as much capital, $1.5 billion, as was planned originally. The terms of the deal are also the same: Investors will still put up a minimum of $2 million and commit to hold the shares until 2013.

The deal won't hurt Goldman either—it will earn at least as much in fees and commissions as before. The reality is that investment banks like Goldman have been moving brokerage and banking business offshore for decades. They are well positioned in Asian and European capitals to continue to do so.

Schwab reported its net income fell to $119 million, or 10 cents per share, for the three months ended Dec. 31, down from $164 million, or 14 cents per share, a year ago.

Without the settlement charges disclosed last week, the San Francisco–based company said its profit rose 33 percent, to $218 million.

Revenue rose 14 percent to $1.13 billion from $986 million a year ago.

Total client assets rose 11 percent to $1.57 trillion. Schwab ended the year with nearly 8 million clients, up 4 percent from a year ago.

However, Schwab's pre–tax profit margin slipped to 20.3 percent from 27 percent in the year–ago quarter.

Excluding the charges, Schwab CEO Walt Bettinger said the company's pre–tax profit margin rose 9 percentage points compared with this year's first quarter. He attributed the improvement to revenue growth and cost controls.

The company reported a 12 percent increase in asset management and administration fees to $497 million in the latest quarter, compared with the same quarter a year ago. The gain was partly due to higher interest revenue.