Stocks turned modestly lower before the close amid more news of weakness in the nation's manufacturing sector, and as a positive call on commodities by Goldman Sachs lifted prices of oil and metals.
The Dow Jones Industrial Average fell more than 20 points after trading lower throughout most of the session. The blue chip average fell 130 points on Thursdayafter a weekend downgrade of Italy's outlook and concerns over Greek debt restructuring.
The Goldman report pushed up energy stocks as Chevron and Exxon Mobil led the Dow higher.
TheS&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to below 18.
Among key S&P sectors, financials and industrials slipped, while energy gained.
"There is currently a tug of war going on in the market, with some investors worried about a continued slowdown in the economy during the second half of 2011," said Michael Sheldon, chief market strategist at RDM Financial Group. "On the other hand, other investors continue to stick to their guns and invest based on continued growth in the global economy in the quarters ahead."
Those worried about a slowdown probably focused Tuesday on a report by the Richmond Federal Reserveshowing a decline in manufacturing activity in May. The Richmond Fed index fell to a negative 6 after a reading of 10 in April, as shipments and new orders declined.
"When you combine this report with the Philadelphia Fed and New York Fed manufacturing reports, the odds are stacking up that we’re going to see some softening in the national ISM report that comes out on June 1," Sheldon said.
The market is also struggling with what will happen when the Federal Reserve stops purchasing long-term bonds, a program known as quantitative easing, at the end of June, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
"The markets are backing off in part because they are concerned whether assets will move higher in the absence of Fed buying," McCain said. "If equity prices correct enough, we may find that once we get past June we see a renewed enthusiasm over the next month or so."
That will depend, too, on how much improvement investors see in the economy, which McCain sees as possible if energy prices continue to move lower.