The Dow and S&P edged lower on Friday after a surprise move by China to restrict bank lending, while the Nasdaq was little changed as strength in technology shares offset other losses.
The hike by China in bank reserve requirements is the second increase in as many months and raised worries about the impact of monetary tightening on global growth.
The move suggests that China considers inflation to be a concern, which is negative, but they're beyond worrying about jobs and growth, which indicates some progress, said Carl Birkelbach, head of Birkelbach Management in Chicago.
Markets initially fell as much as 1 percent on China's move, as well as on weaker-than-expected data on U.S. consumer sentiment and business inventories.
The China policy move boosted the U.S. dollar and knocked commodity prices and resource stocks lower. Crude oil futures fell 2.1 percent to $73.70 a barrel.
Worries over high unemployment eroded consumer sentiment early this month. The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for February was 73.7, below analysts' expectation of 75.0.
The data is another sign that the economy isn't in a v-shaped recovery, Birkelbach said. Right now it looks like there's a lot more downside risk than upside risk.
The Dow Jones industrial average was down 44.67 points, or 0.44 percent, at 10,099.60. The Standard & Poor's 500 Index was down 3.04 points, or 0.28 percent, at 1,075.43. The Nasdaq Composite Index was up 1.35 points, or 0.06 percent, at 2,178.71.
The Nasdaq was lifted by Research in Motion
The top drag on the Dow was 3M Co
Gainers included Agilent Technologies
(Editing by Kenneth Barry)