Stocks closed mostly lower, dragged down by higher energy prices and defiance from Iran on its nuclear program. Technology rallied on strength in semiconductors, giving the Nasdaq a boost.
The industrials sector was the worst performer. Deere fell significantly after hitting an all-time high Wednesday on aggressive profit-taking.
"Investors are somewhat cautious at these market levels," Michael Sheldon, Chief Market Strategist at Spencer Clarke, told CNBC.com. "Next week a lot of economic data will be out and that could help further determine the near-term direction of the market."
Higher energy prices and concerns about Iran's nuclear ambitions weighed on the markets.
"There is no one big catalyst, but several issues are giving traders an opportunity to take some profits," Phil Orlando, Chief Equity Market Strategist at Federated Investors, told CNBC.com. "Will crude continue to move up? Could there be some military response to the Iranians intentionally missing a U.N. deadline? Plus, there's continued spillover from Wednesday's bad CPI."
Energy was the best performing sector as oil moved back above $60 a barrel after a larger-than-expected draw down in distillates, which includes home heating oil.
A report that Iran will not give up its nuclear ambitions to satisfy U.N. Security Council demands helped to weigh down bullish sentiment. Also rumors that the government was about to raise the terror alert circulated, but were quickly discounted.
"We've had such a strong run, people are reluctant to throw money into the market, so they are looking for a catalyst to stay confident," Peter Dunay, Chief Investment Strategist at Leeb Group, told CNBC.com. "Oil breaking above $60 is a little unnerving. We have to watch to see if oil continues to move up. The market may set up for a very small correction if that happens."
New York light crude futures rose above $60 a barrel after a greater decline in distillates than expected. Distillates include home heating oil. Supply concerns also persisted after a pipeline shutdown in the U.S. Northeast, due to a spill.
Crude inventories grew by 3.7 million barrels. Analysts predicted a 700,000-barrel rise in crude inventories for last week, according to a CNBC/Dow Jones survey. Distillate inventories saw a bigger draw down than expected of 5 million barrels, with gasoline stockpiles dropping 3.1 million barrels, also bigger than expected.
Natural gas inventories fell 223 billion cubic feet, less than the expected 235 billion cubic feet.
The Nasdaq finished higher helped by semiconductors, which made a strong showing after Analog Devices said there are improving trends in some of its business segments. Information technology was the leading S&P 500 sector, followed by utilities.
Apple Computer reached an agreement with Cisco Systems to share the "iPhone" name. Cisco had sued Apple claiming trademark infringement.
The Labor Department said the number of people filing for unemployment dropped by 27,000 to 332,000. Economists had expected a larger decline. Treasury prices fell, sending yields higher.
Meanwhile, supermarket chain Whole Foods Markets rose after agreeing Wednesday to buyWild Oats Markets for $565 million in cash and reporting sales at stores open at least a year up 7% for its latest quarter.
Homebuilder Toll Brothers turned lower after reporting a sharp drop in quarterly profit from the year-ago period.
January's sharp fall in housing starts indicated that the housing slump is far from over and Toll Brothers said markets are still too soft to predict a general upturn in housing activity for this year.
Shares of J.C. Penney fell after the retailer said fourth-quarter profit fell 13% with year-ago results including higher income from discontinued operations.
HSBC Holdings announced the departure of two of its top U.S. managers after the bank warned bad debt charges would be 20% higher than expected, due to exposure to high-risk mortgages.
Abercrombie & Fitch said its fourth-quarter profit surged 20%, but the apparel company warned that results in the first half of the fiscal year would be pressured.
European Shares Close Higher
The Frankfurt DAX rose after Germany’s gross domestic product grew at a rate of 0.9% in the fourth quarter, with a jump in exports countering a big reduction in inventories, according to the Federal Statistics Office.
In addition, chemical group BASF met forecasts with a 17.3% rise in fourth-quarter operating profit, excluding certain items. BASF traded up 5%..
The SMI rose as Swiss company Nestle posted better than expected net profit of $7.43 billion in 2006, boosted by its food and beverages business. Shares in Nestle rose.
In London the FTSE-100 closed higher as the U.K.’s BAE Systems reported a 33% rise in 2006 profits, ahead of analysts’ expectations. Shares in the company were up around 3%.
French insurer AXA posted an 18% rise in 2006 net profit, beating average forecasts on capital gains. The Paris CAC-40 gained. AXA was up 3% on the results.
Asian Markets Find New Records, Yen Continues to Decline
It was a record-setting session for Asian markets Thursday with South Korea and Australia hitting all-time peaks. Japan also closed near a seven-year high.
The Nikkei 225 Average finished above the 18,000 level for the first time in nearly seven years, with exporters such as Canon rising on a soft yen after the central bank raised interest rates but said further increases would be gradual. Small steel firm Tokyo Kohtetsu ended down, shedding its earlier gains after its shareholders rejected a proposed share swap between the company and Osaka Steel.
In Australia, the S&P/ASX 200 Index closed at an all-time high, settling above the 6,000 level for the first time, boosted by gains in banks such as National Australia Bank and upbeat company earnings.
In markets still trading, Singapore's Straits Times Index lost early gains to trade little changed. Stocks broke through the 3,300 level in early trade to hit a new intraday high.
Hong Kong stocks advanced as China Mobile extended gains a day after reporting strong subscriber data, while oil stocks followed crude prices higher.