The Dow and the S&P were on track to post their sixth consecutive weekly drop for the first time since mid-2008 on Friday as China's weaker trade data and disputes about a second bailout of Greece escalated concerns about the global economic slowdown.
The previous day's stock market rally ended a six-day losing streak, but the advance was short-lived as many analysts had predicted.
The Nasdaq, which wiped out its yearly gains earlier in the session, was just slightly positive. In late trading, the Dow rose back above the 12,000 mark.
Stocks that rebounded on Thursday -- mainly cyclical sectors such as financials and commodities -- resumed their decline and ranked among Friday's biggest losers. A string of sub-par U.S. economic data in the past few weeks has turned investors away from risk assets.
Reflecting the bearish sentiment, options traders eyed calls on the CBOE Volatility Index <.VIX>, Wall Street's so-called fear gauge, which moves inversely to the performance of the S&P 500. The VIX was up 3.4 percent at 18.38.
The Dow Jones industrial average <.DJI> was down 112.47 points, or 0.93 percent, at 12,011.89. The Standard & Poor's 500 Index <.SPX> was down 10.75 points, or 0.83 percent, at 1,278.25. The Nasdaq Composite Index <.IXIC> was down 24.41 points, or 0.91 percent, at 2,660.43.
The S&P 500 has fallen about 7 percent from its intraday peak early last month. Many see the benchmark index sliding back to around 1,250, its March low, where valuations could bring investors back into equities.
Could sellers overwhelm the buyers for awhile? It's possible, but once we get down to the correction level in March, I think the market will hold, said Robert Lutts, president and chief investment officer of Cabot Money Management in Salem, Massachusetts.
At 1,250, the S&P 500 would be roughly 2 percent below current levels and approaching a 10 percent decline commonly referred to as a correction.
Bank stocks ranked among the top decliners. The Federal Reserve said it plans to expand the number of banks it will subject to annual tests used to determine if stock dividends can be increased and whether an institution is holding enough capital.
The KBW regional banks index <.KRX> fell 0.7 percent.
It's an incremental negative that makes it easier to be negative and sell any financial stocks right now, said Michael James, senior trader at Wedbush Morgan in Los Angeles.
The financial stocks have been a big weight and an underperformer all year so the path of least resistance in the financials continues to be lower.
The S&P energy index <.GSPE> was down 1.5 percent while the S&P index of industrial stocks <.GSPI> lost 1.1 percent.
China's sales to the United States and the European Union slumped to their weakest since late 2009, excluding Lunar New Year holidays, underlining the view that the world economy is stumbling.
In another negative for U.S. stocks, the euro tumbled more than 1 percent against the U.S. dollar as fears about Greece's debt returned to the forefront and investors curbed expectations about the European Central Bank's interest-rate hikes. Investors have been recently trading the correlation between stocks and the dollar.
The PHLX semiconductor index <.SOX> slid 1.3 percent, sinking to its lowest since early December. The SOX fell below its 200-day moving average for the first time since last October.
(Reporting by Angela Moon; Editing by Jan Paschal)