U.S. stocks on Friday mostly gained, cutting weekly losses, as investors remained cautious before a Federal Reserve policy meeting next week that should shed light on the central-bank's plans for its asset-purchasing program.
"We think stocks are showing signs of indigestion and discounting to some degree the possibility of a taper next week. Clearly, Wednesday is a big day for capital markets globally," said Jim Russell, senior equity strategist for US Bank Wealth Management, referring to the two-day Federal Open Market Committee session that starts Tuesday.
"Wall Street's confusion around this is there is a case to be made to begin now, and not to," he said.
Slightly stronger employment numbers over the last four months, elevated consumer confidence and rising home prices all argue in favor of the Fed beginning to scale back on its $85 billion in monthly bond purchases sooner rather than later. "The case against taper literally centers on numbers we got this morning. Inflation remains very tame at this time," Russell added of data from the Labor Department that had wholesale prices falling for a third month in November, down 0.1 percent after a 0.2 percent drop in October.
"Everybody is so concerned that the Fed meeting is going to surprise us with an announcement on tapering -- I don't buy it; four or five years of very accommodative policy doesn't switch on a dime, but that's what is playing with the market's blood pressure this week," said Charlie Smith, chief investment officer at Fort Pitt Capital in Pittsburgh.
Texas Industries surged after Bloomberg cited people familiar with the matter in reporting it was exploring options including a sale. Adobe Systems rallied after reporting more customers for its online software in the fourth quarter than expected.
After wavering, the Dow Jones Industrial Average climbed 15.93 points, or 0.1 percent, to 15,755.36, with Visa pacing gains that included 14 of its 30 components. It finished 1.7 percent lower on the week.
Down 1.7 percent for the week, the S&P 500 ended fractionally lower, at 1,775.32, with energy and telecommunications hardest hit and materials and industrials the best performers of its 10 major sectors.
Verizon Communications and AT&T were among the telecommunications companies hit a day after U.S. wireless carriers agreed to make it easier for consumers to 'unlock' their devices for use on rivals' networks, caving to pressure from consumer groups and regulators.
Both the Dow industrials and the S&P 500 fell for a second weekly decline, their first back-to-back weekly loss in just over two months.
The Nasdaq rose 2.57 points, or less than 0.1 percent, to 4,000.98, with the technology-heavy index posting an 11th consecutive Friday gain. It closed with a 1.5 percent weekly loss.
For every three stocks falling, roughly four gained on the New York Stock Exchange, where almost 639 million shares traded. Composite volume approached 3.1 billion.
The dollar held steady against the currencies of major U.S. trading partners and borrowing costs reflected in the 10-year Treasury note fell, with the benchmark's yield down 2 basis points at 2.86 percent.
Helping bolster sentiment, the House of Representatives late Thursday approved a budget that curbs automatic spending reductions and averts another government shutdown. The bipartisan legislation, which shields corporate tax breaks favored by Republicans and entitlement programs supported by Democrats, now goes to the Senate for approval and also needs the signature of President Barack Obama.
While widely expected, the accord is a constructive development, "and takes a degree of Washington disruption off the table for investors," said Russell.
Equities on Thursday declined for a third session as Wall Street weighed the timing of anticipated reductions in the Fed's monetary stimulus.
"The initial read from retailers has been disappointing. Sales are occurring, but only at heavily discounted prices, and traffic is light, which is particularly worrisome because the shopping season this year is shorter than normal," said Lawrence Creatura, portfolio manager at Federated Investors..
"Investors are awaiting a Santa Claus rally, which is yet to arrive. Santa is still apparently packing his sleigh," Creatura added.
—By CNBC's Kate Gibson
More From CNBC.com: