Stocks fell from 29-month highs on Friday as Amazon and Ford reported weak results and investors worried about escalating protests in Egypt against the government.
Nasdaq quotations for its main stock indexes resumed after nearly a one-hour outage. Nasdaq OMX Group has not yet said what caused the problem.
Shares in energy companies fell despite a 2.9 percent rise in U.S. crude futures. Uncertainty over the impact of the Egyptian riots on the Middle East and anemic growth in Chevron's reserves weighed on oil stocks.
Chevron dropped 1.1 percent to $93.72 and the S&P energy sector fell 0.7 percent.
The market response to earnings in Microsoft, Amazon and Ford is disappointing, said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.
Then you throw in Egyptian riots possibly spreading ... we're going into a weekend where anything is possible in Egypt, he said.
Dozens of people were wounded as police and demonstrators fought running street battles in Cairo in unprecedented protests against President Hosni Mubarak's three-decade rule.
The Dow Jones industrial average dropped 120.30 points, or 1.00 percent, to 11,869.53. The Standard & Poor's 500 fell 15.91 points, or 1.22 percent, to 1,283.63. The Nasdaq Composite lost 58.44 points, or 2.12 percent, to 2,696.84.
In another sign of uncertainty, the CBOE volatility index rose 13.1 percent to 18.26 in its largest daily percentage gain since late November.
However, the Dow was still on track to finish a ninth straight week of gains.
During the Nasdaq outage, traders said there were no quotes for the Nasdaq composite and the Nasdaq 100 index. Individual share price quotes were not affected, and trading volume in the first half-hour was the highest this week.
There seems to be a data feed issue. It is making people hesitant to make decisions, said Kevin Kruzenski, head of listed trading at KeyBanc Capital Markets in Cleveland. It's like someone just turned off the light.
Equities got some support from data showing the U.S. economy grew at a 3.2 percent rate in the fourth quarter as consumer spending accelerated. Excluding inventories sales grew about 7.1 percent, the best since 1984.
Ford Motor Co slumped 11.6 percent to $16.61 after a steep drop in quarterly profit due to a charge for debt payments. Rival automaker General Motors Co lost 5 percent to $36.75.
Dow component Microsoft Corp fell 3.2 percent to $27.95 a day after it posted a dip in profit. Online retailer Amazon.com Inc recorded revenue below the consensus view, sending its stock 7.7 percent lower to $170.24.
(Reporting by Rodrigo Campos; additional reporting by Angela Moon; Editing by Kenneth Barry)