Stocks finished lower Friday after a late selloff erased the day's gains.
Stocks struggled to hold gains for much of the day but worries about a possible downgrade of the U.S.'s credit rating left the market on rocky ground ahead of the Memorial Day weekend.
The Dow Jones Industrial Average lost 14.81, or 0.2 percent, to close at 8,277.32. The S&P 500 fell 0.1 percent and the Nasdaq shed 0.2 percent.
All major financial markets are closed Monday for the Memorial Day holiday.
The Dow finished the week relatively flat — up just 0.1 percent. The Nasdaq gained 0.7 percent, and the S&P added 0.5 percent.
Volume was light, with many investors getting a jump on the three-day weekend. About 1.06 billion shares changed hands on the New York Stock Exchange, well below last year's daily average of 1.49 billion. Advancers and decliners were roughly even, with advancers just slightly outpacing decliners.
Reflecting the nervousness in the market, the CBOE Volatility Index , widely considered the best gauge of fear in the market, creeped higher, ending the week at 32.56. Earlier in the week, the VIX finished below 30 for the first time since September when Lehman brothers collapsed and the market embarked on its downward odyssey.
And gold, typically a safe haven for investors, rose for four straight days, settling around $958.90 an ounce on Friday after hitting an intraday high above $963.
The week started with a focus on credit-card reform, but ended with jitters on the trading floor about a the possibility that the U.S. will lose its prized "AAA" debt rating.
The jitters emerged after Standard & Poor's on Thursday downgraded the UK economy to "negative" from "stable." It not only raised doubts about the UK's credit rating but also stoked concern about the U.S.'s credit rating.
"The market views those two countries — the UK and the U.S. — as relative twins," Pimco's Bill Gross told CNBC.
Rival ratings agency Moody's said Friday it was comfortable with its current top-tier ratingon the U.S., but that only pacified the market for a little while.
Market pros said the market has overreactedto the newsbecause, while the worries aren't completely unfounded, they are premature.
"[T]he likelihood that these two countries get downgraded will not be decided in 2009 and 2010," Michael Mewes, portfolio manager at JPMorgan Asset Management, said on CNBC.
Those worries sent the dollar to a five-month low, which, in turn, boost shares of some multinational corporations including McDonald's , which was the Dow's biggest percentage gainer, up 2.5 percent.
Major credit-card providers finished lower after President Obama signed into law sweeping reforms of the industry, cracking down on rates and fees.
Capital One tumbled 4.4 percent, while Bank of America fell 3 percent. Citigroup and JPMorgan Chase each lost more than 1 percent.
General Motors’ tumbled to the bottom of the Dow pack, finishing down 25 percent, after GMAC said it could take the government 17 years to shed its investment in the auto and mortgage lender if it goes public. Meanwhile, the Obama administration said talks on GM bankruptcy won't go past June 1, though they might run right up until the last minute.
GM was the Dow's worst performer this week, down more than 32 percent.
At the other end of the totem pole, Coca-Cola was the Dow's biggest gainer this week, up nearly 5 percent.
Meanwhile, AIG chairman and CEO Ed Liddy said he will step down as soon as a replacement is found. At the same time, the company announced that it is pursuing a 1-for-20 reverse stock split, sending shares down 5.6 percent.
Elsewhere, Sears Holding shot up more than 10 percent after the department-store operator posted a surprise profit of 21 cents a share Thursday even as revenue fell 9.2 percent.
The market's lackluster performance this week, followed a 4.4-percent slide last week. Still, the Dow is up 26 percent since its March 9 lows. The S&P is up 31 percent and the Nasdaq is up a whopping 33 percent.
Year-to-date, the Dow and S&P remain lower — 5.7 percent and 1.8 percent, respectively — but the Nasdaq is up 7.3 percent.
Nine Dow components remain higher for the year, including American Express , IBM and JPMorgan .
Over on the S&P, Sprint Nextel is the year's best performer year to date, up nearly 182 percent.
Eastman Kodak is the S&P's worst performer year to date, down more than 59 percent.
On Tap for Next Week:
MONDAY: All major financial markets are closed for the Memorial Day holiday
TUESDAY: Case-Shiller home-price index; Conference Board consumer-confidence index
WEDNESDAY: Weekly mortgage applications; existing-home sales; Earnings from Dollar Tree, Staples and American Eagle
THURSDAY: Weekly jobless claims; durable goods; new-home sales; weekly crude inventories; Fed's Fisher speaks; Earnings from Costco, Sears and Dell
FRIDAY: GDP; Chicago PMI; University of Michigan/Reuters consumer sentiment; earnings from Tiffany
Send comments to cindy.perman@nbcuni.com.
