Stocks fell Thursday, closing a quarter of losses, as a sharp rise in oil prices offset data showing muted inflation and insurer American International Group lost 3 percent after losing its credit rating.

The Dow Jones industrial average (search) was down 37.17 points, or 0.35 percent, to end at 10,503.76. The Standard & Poor's 500 Index (search) was down just 0.82 of a point, or 0.07 percent, at 1,180.59. The Nasdaq Composite Index (search) was down 6.44 points, or 0.32 percent, to close at 1,999.23.

For the quarter, the Dow ended off 2.6 percent and the S&P 500 finished down 2.6 percent, making it the worst quarter for the S&P 500 in two years.

The Nasdaq fell 8.1 percent, its largest percentage decline since the third quarter of 2002, when it dropped 19.9 percent.

The report from Goldman Sachs warned oil was entering a "super spike" period that could drive prices as high as $105 per barrel, but many on Wall Street were skeptical about the call. The only thing that could take crude to such high levels would be a major disruption in supply from Iran, Iraq or Saudi Arabia, which seems unlikely at this point, said Tracy Herrick, chief economist for the Private Bank of the Peninsula, in Palo Alto, Calif.

The report seemed to have an impact on trading, nonetheless; crude futures surged $1.41 to $55.30 per barrel on the New York Mercantile Exchange (search) — difficult for stock investors to ignore.

"The important thing today, the only thing of significance, is the oil figure," Herrick said. "That is the most troubling thing for the market because it has a long-term negative effect on the economy and could act as a drag on profits. Everything else indicates the economy is in glide path for continued strength. The increases in interest rates so far have had no impact on the economy, so that's not an issue. Oil is the issue."

The lackluster session came a day after U.S. stocks staged their biggest rally in nearly four months. Investors were cautious Thursday ahead of Friday's closely watched U.S. jobs report for March.

The oil price hike "greased" the downside for the indexes, said Al Goldman, chief market strategist at A.G. Edwards.

"Tomorrow we've got the widely anticipated employment figures so there're lots of reason for the market to take a little siesta here," Goldman said.

"But there's something to look forward to — April has been the best month of the year since 1950 for the Dow," Goldman added, "and April is helped if you come off a soft March."

The Stock Trader's Almanac says April has been the best month for the Dow average since 1950.

Traders and strategists pointed to some impact from the end of the quarter, which can trigger window dressing — when money managers buy shares to boost their portfolios. Goldman said "a lot of that was taken care" of Wednesday.

Among falling stocks, American International Group Inc. (AIG) sank after acknowledging accounting errors and losing its prized "AAA" credit rating with Standard & Poor's.

AIG shares dropped 3 percent, or $1.75 to $55.41. Wednesday, AIG acknowledged accounting errors that could stretch back 14 years and Standard & Poor's cut AIG's debt ratings.

Shares of Johnson & Johnson (JNJ) slid 1.3 percent, or 89 cents, to $67.16, and the stock of Biomet Inc. fell 7 percent, or $2.73, to $36.30 after several orthopedic device makers received subpoenas in a federal probe of their relationships with surgeons.

But energy shares' advances helped keep the S&P 500 level. They received a boost from soaring oil prices, with Exxon Mobil Corp. (XOM) up 0.6 percent at $59.60, and ConocoPhillips (COP) up 2.3 percent at $107.84.

Modest gains in interest-rate sensitive stocks such as banks also helped support the S&P 500. The Philadelphia KBW Bank Index (search) rose 0.1 percent.

The Commerce Department said the price index for personal consumption expenditures, excluding food and energy, rose 0.2 percent in February, in line with the median analysts' forecast.

In other economic news, U.S. consumer spending advanced 0.5 percent in February and underlying inflation slowed, government data showed on Thursday, but weekly jobless claims posted an unexpected jump.

The number of Americans filing new claims for unemployment benefits rose to its highest level in 11 weeks, up 20,000 to 350,000 last week. However, the broader, four-week moving average remains low enough to suggest continued job creation. Wall Street expects Friday's job creation report to show about 220,000 new jobs for March.

"My guess is the number is not going to surprise much and the major market averages are going to try to extend on the upside," said Jeffrey D. Saut, chief investment strategist at Raymond James & Associates. "The question is, is it going to be one of these three- to five-day oversold, throwback rallies, or is it going to develop into something more meaningful? I don't think you're going to be able to tell that until next week."

Shares of Biomet Inc. (BMET) fell 9.3 percent to $35.40 and Johnson & Johnson was down about 1 percent at $67.42 after several orthopedic device makers received subpoenas in a federal probe of their relationships with surgeons.

Shares of one prosthesis maker that was not reported to have received a subpoena were also lower. Zimmer Holdings Inc. (ZMH) was down 8.6 percent at $75.48.

Shares of department store retailers J.C. Penney Co. (JCP) and Saks Inc. (SKS) were higher amid rumors that private equity firm Cerberus may bid for Penney, and Women's Wear Daily reported that Saks is seeking to spin off its Saks Fifth Avenue division. Penney was up 8.4 percent, or $4.02, at $51.92; Saks rose 9.1 percent, or $1.50, to $18.05.

Irish drug maker Elan Corp. PLC (ELN) plunged 54 percent, or $3.74, to $3.24, and Biogen Idec (BIIB) Inc. fell 10 percent, or $3.84, to $34.51, after the companies confirmed a third patient taking their suspended drug Tysabri had contracted a rare neurological disease. The news cast greater doubt on hopes the drug could return to sale this year — if ever.

Trading was active, with 1.72 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.81 billion shares were traded on Nasdaq, matching last year's daily average.

Advancers outnumbered decliners on the New York Stock Exchange by about 5 to 3 and were about even on Nasdaq.

The Russell 2000 index, which tracks smaller company stocks, was up 0.17, or 0.03 percent, at 615.07.

Overseas, Japan's Nikkei stock average added 0.89 percent. In afternoon trading in Europe, France's CAC-40 rose 0.08 percent, Britain's FTSE 100 slid 0.13 percent and Germany's DAX index inched up 0.03 percent.

Reuters and the Associated Press contributed to this report.