Stocks End Lower on Investor Caution

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Wall Street ended slightly lower for the day Friday, but higher for the week, as cautious investors cashed in profits from an impressive rally the day before.

The Dow Jones industrial average ended lower 14.31 points, or 0.15 percent, to close at 9,644.82. The Nasdaq Composite index closed lower 3.81 points, or 0.20 percent, to end at 1,905.74, while the Standard & Poor's 500 index was down 3.27 points, or 0.31 percent, to end at 1,036.31.

For the week, the Dow rose 1.82 percent, the S&P 500 gained 1.73 percent and the Nasdaq advanced 2.8 percent.

Stocks had rallied on Thursday, pushing the blue-chip Dow Jones industrials and the broad Standard & Poor's 500 to their highest level since June of last year and driving the tech-packed Nasdaq to its highest point since March 2002.

After such a hefty run-up, investors were taking a more cautious stance as corporate America heads into the earnings warning season, when many companies issue forecasts for the current quarter's results, traders said.

Stocks are on track to end the week on a positive note. The Nasdaq is up about 2.3 percent so far this week, the Dow is up roughly 1.5 percent, and the S&P 500 has advanced 1.4 percent.

Market watchers were bracing for heightened volatility, driven by the expiration of four different options and futures contracts.

"Quadruple witching" occurs each quarter on a Friday and may trigger sudden moves in the market, as investors either exercise their positions or roll them forward at the last minute. But volatility was mostly absent, because many players have already adjusted their positions, traders said.

"Having 5 million people without power (on the U.S. East Coast) has cast a bit of a pall over the market as well," Kayes said, referring to homes and businesses that were left without power after Hurricane Isabel, which was downgraded to a tropical storm overnight.

Nike Inc. (NKE) shares jumped, after it reported better-than-expected quarterly earnings and several major brokerages raised price targets. Shares of Nike, the world's leading athletic shoemaker, rose $4.25, or 7.42 percent, to $61.50. On Thursday, the company posted earnings for the latest quarter that beat Wall Street forecasts, driven by the weak U.S. dollar and strong overseas sales.

Tyco International Ltd. (TYC) rallied to a new year high, after J.P. Morgan added the conglomerate to its list of recommended stocks, saying investors are underestimating its ADT security alarm business.

ADT was the center of Tyco's numerous accounting woes over the past year, which led it to restate its results going back 5-½ years. Tyco shares rose 90 cents, or 4.29 percent, to $21.90.

On the Nasdaq, Red Hat Inc. (RHAT), a leading distributor of Linux software, soared a day after it reported a second-quarter profit versus a year-ago loss, due to a jump in corporate subscription sales. Red Hat shares ended up $1.48, or 17.62 percent, at $9.88 and were among the Nasdaq's biggest percentage gainers.

FedEx Corp. (FDX) fell $2.35 to $66.25 after Morgan Stanley lowered the company's stock rating to "equal-weight" from "overweight."

Palm Inc. (PALM) dropped $1.52 to $21.05 after the tech company narrowed its quarterly loss; however, revenue came in at the low end of forecasts.

AmerisourceBergen Corp. (ABC) declined $1.82 to $54.83 after The Wall Street Journal reported the company was being investigated by the Food and Drug Administration and the Federal Bureau of Investigation.

About 1.46 billion shares changed hands on the New York Stock Exchange and roughly 1.86 billion shares traded on the Nasdaq. Advancers outnumbered decliners by a ratio of 9 to 7 on the Big Board, and by about 16 to 15 on the Nasdaq.

The Russell 2000 index, a barometer of smaller company stocks, rose 0.74, or 0.14 percent, to 520.20.

Overseas, Japan's Nikkei stock average finished 0.9 percent lower Friday. In Europe, France's CAC-40 fell 1.2 percent, Britain's FTSE 100 dropped 1.3 percent and Germany's DAX index declined 0.9 percent

Reuters and The Associated Press contributed to this report.