Stocks closed modestly lower on Friday as a drop in energy stocks and investor uncertainty ahead of next week's Fed meeting kept buyers on the sidelines.
"I don't think today's trading had much to do with today in and of itself," said Steven Lord, chief investment strategist at The Trend Investment Group. "You're seeing hesitancy to jump in there to catch the falling knife. We've had mini corrections in the past but what we didn't have was the subprime thing hanging over the market."
"The best time to buy stocks is when you are most miserable and uncomfortable buying stocks when everybody else is dumping them," Al Goldman, chief market strategist at A.G. Edwards, told CNBC. "We became a buyer for aggressive accounts on Wednesday and felt that there was some panic indiscriminate selling of stocks short."
New York light crude futures closed just above $57 a barrel on the New York Mercantile Exchange, touching a six-week low.
The Dow Jones Industrial Average ended the week down 1.4% while the S&P 500 and Nasdaq fell 1.1% and 0.6%, respectively.
All ten sectors in the S&P 500 closed in the red, with weakness seen in the energy sector and basic materials shares. Breadth was only slightly negative with decliners outpacing gainers by about three to two.
Trading volume was unusually high on Friday due to quadruple options expiration, and could remain brisk next week due to the Federal Reserve's FOMC meeting, along with monthly housing starts and other economic data.
"None of us are expecting them to do anything but stay the course," said Lord. "The possibility of the Fed cutting rates is really off the table now."
"I think you are going to see very choppy, very volatile market. That's not necessarily that bad, it gives folks like us opportunity to buy good companies at less expensive prices," said Andrew Seibert, senior portfolio manager at Stewart Capital.
Investors received a mixed batch of economic data. This morning, the U.S. government reported consumer inflation data slightly higher than expected. The Consumer Price Index rose 0.4% in February, slightly above economists' estimate of 0.3%. The core rate, which excludes volatile food and energy prices, rose 0.2% as expected.
"I think the CPI number wasn't as bad as everyone expected," Joe Ranieri, managing director of NASDAQ Trading at Canaccord Adams, told CNBC. "We got some mild inflationary fears, but everybody's going to be waiting to see what the Fed is going to do. I believe they will hold their neutral stance with some caution."
Private equity firm Blackstone Group is deep into preparations for an initial public offering the could be filed in the next two weeks, according to an exclusive report by CNBC's David Faber. Wall Street sources told Faber the company is working with investment banks Lehman Bros. and Citigroup to launch the IPO.
Airlines that serve the New York area are canceling flights due to a winter storm. JetBlue Airways canceled all its flights Friday because of a snow storm on the East coast, attempting to avoid days of further cancellations and the criticism that followed after last month's snow storm. Delta and United Airlines also canceled flights.
Shares of Accredited Home Lenders rose after the subprime lender said it will sell $2.7 billion in loans. The sale is expected to be completed within days. The company says the loans will be sold at a substantial discount in order to alleviate recent pressures from margin calls.
Fremont General also got a boost after it said Credit Suisse increased the mortgage lender's credit line to $1 billion.
Europe Closes Flat, Asian Stocks Mixed
The major European indexes pared earlier losses, and closed Friday's trading flat.
In France, steelmaker Arcelor Mittal signed an agreement with Noble International to combine their laser-welded steel businesses. Arcelor Mittal will receive $300 million in cash, shares and other financial obligations, the company said. The CAC-40 was slightly higher while the FTSE 100 closed flat.
Germany's Volkswagen cut prices on several of its China-made cars by up to 11%, to promote sales in the fiercely competitive market. The DAX ended relatively unchanged.
Japan's Nikkei 225 Average finished down, erasing most of the gains made in the previous session, as lingering concerns about the U.S. economy prompted investors to book profits in recent gainers such as Sumitomo Realty & Development and other property shares.
Seoul shares ended little changed after trading in a narrow range while Hong Kong's Hang Seng Index closed slightly lower as HSBC shares ended down as investors remain concerned the bank's exposure to the troubled U.S. subprime lending sector. Chinese shares were also lower at the close.