Stocks reversed course late Friday, finishing slightly lower as early gains built on better earnings reports from retailers faded away.
Trading was choppy, and the market's swings were exaggerated by light volume ahead of the Memorial Day weekend.
Stocks drifted lower for much of the week. With few economic reports coming out, the market was left with little fuel to sustain a two and a half-month surge that has lifted stocks up more than 30% from 12-year lows in early March.
Next week's economic calendar is much more heavily loaded, with key reports coming on home sales, big-ticket manufactured goods and consumer confidence.
Whether those data please or disappoint the market could be the key to determining what becomes of the spring rally, which many investors believe was overdone.
"Everything is overpriced," said Harry Rady, chief executive and portfolio manager of Rady Asset Management. "A very long, protracted recession is still very much alive."
The Dow Jones industrial average fell 14.81, or 0.2%, to 8,277.32. The S&P 500 index slipped 1.33, or 0.2%, to 887.00, and the Nasdaq composite index lost 3.24, or 0.2%, to 1,692.01.
Despite the market's seesaw movements this week, all the major indicators finished the five-day period in the black. The Dow rose 0.10%; the S&P 500 index rose 0.47%; and the Nasdaq rose 0.71%.
Better-than-expected results from Sears shld, Gap gps and Aeropostale aro temporarily brightened the mood at the end of a week that brought fresh concerns about the market being overextended. Earlier in the week the Federal Reserve raised its estimate of how high unemployment might run and how much the economy could slow before recovering.
The market also was jolted by a warning Thursday from Standard & Poor's that it could downgrade the British government's AAA debt rating, which would increase its borrowing costs. That got some thinking that the United States' own top-shelf rating might also be in jeopardy.
Worries about the U.S. government's credit ratings eased somewhat on Friday, but Treasurys and the dollar both lost ground, with the dollar falling to its weakest level against the euro since January.
The yield on the 10-year Treasury note hit a new high for the year, climbing to 3.46% from 3.37% late Thursday. The 10-year note is a widely used benchmark for home mortgages and other kinds of loans.
Meanwhile, gold prices rose about 1% as investors looked for safety.
"The crisis of deficit financing and deficit spending is moving its way up the food chain," said John Brady, senior vice president of global interest rate products at MF Global in Chicago. Brady said investors are worried about whether the economy will be able to recover if interest rates are higher and the dollar is weaker.
Investors were already concerned about the U.S. government's ability to fund its massive interventions to prop up the U.S. banking system and stimulate the economy, and the downgrade warning unnerved the market further.
Some of the signals this week were encouraging, however. The Federal Reserve said banks reduced borrowing from its emergency loan program over the past week, while investment banks didn't borrow at all — the first time that's happened since early September.
Financial stocks were mixed after federal regulators made their biggest bank seizure in the year to date as investors tried to figure out how many more failures might be coming. Credit card issuers mainly fell as President Obama signed into law new rules for the credit card industry.
Federal officials late Thursday seized Florida thrift BankUnited FSB in a move that is expected to cost the Federal Deposit Insurance Corp.'s insurance fund $4.9 billion. It's the costliest hit since last year's seizure of California lender IndyMac Bank that is estimated to have cost $10.7 billion.
Bank of America fell 34 cents, or 3%, to $11.07, while Capital One Financial fell $1.01, or 4.4%, to $21.92. American Express fell 75 cents, or 3.1%, to $23.40.
Among retailers, Sears Holdings turned in an unexpected profit for its fiscal first quarter, rebounding from a loss a year earlier, as the retailer worked to manage inventory. The stock jumped $5.21, or 10.4%, to $55.40.
In other trading, the Russell 2000 index of smaller companies fell 3.60, or 0.8%, to 477.62.
Markets will be closed on Monday for the Memorial Day holiday.