Declining issues outpaced advancers by about 3 to 2 Friday on the New York Stock Exchange. Consolidated volume came to 4.78 billion shares, down from 5.48 billion shares traded Thursday.
Government bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.56% from 3.71% late Thursday.
The dollar was mixed against other major currencies, while gold prices rose. Light, sweet crude oil advanced $1.30 to settle at $90.71 a barrel on the New York Mercantile Exchange.
Investors are looking for clues about whether the market is due to add to its gains after a brief hiatus or whether another pullback is in the offing. Despite the increases logged this week, stocks are still down sharply in the new year.
"The market is extremely sensitive to any news that's out there. A year ago, it brushed off a lot of stuff. Now, it's just the opposite, and we're seeing reactions nearly immediately when things come out," Fullman said.
Despite giving up the early gains, Wall Street still appeared pleased by reports from U.K. newspapers that billionaire Wilbur Ross was in talks to acquire bond insurer Ambac Financial Group. Financial woes at many U.S. bond insurers have caused headaches in recent weeks for investors worldwide who have worried that tightness in the credit markets could worsen should one of the companies buckle under an inability to draw new business.
Ambac rose 21 cents to $11.54.
Word of Ross' interest follows comments this week by New York State regulators that indicated they would consider lending support to shore up the struggling bond insurance industry. While uncertainty remains over what role regulators might play, the comments initially helped reassure Wall Street and made room for stocks to rally.
Other corporate news appeared to offer investors mixed readings on the economy.
Microsoft finished down 31 cents at $32.94 after spending much of the session higher. The company raised its forecast for the rest of its fiscal year, which ends in June, and said its quarterly earnings jumped 79%. Microsoft cited the growing importance of its sales outside the U.S.
The Russell 2000 index of smaller companies fell 4.12, or 069%, to 688.60.
Overseas, Britain's FTSE 100 closed down 0.1%, Germany's DAX index finished off 0.1%, and France's CAC-40 fell 0.8%. Japan's Nikkei stock average jumped 4.1% after falling sharply earlier in the week. Hong Kong's Hang Seng index likewise surged 6.7% by the close.