Wall Street was unmoved by the Labor Department's latest take on unemployment, the only economic indicator released before the session. First-time jobless claims rose by an expected 4,000 last week to a seasonally adjusted 322,000.

Other economic reports were likewise mild. The Chicago Purchasing Managers Association index of Midwestern economic activity was relatively steady at 61.5 in December, compared to 61.7 in November. And home sales declined modestly in November, according to the National Association of Realtors.

With the new year coming, investors consolidated their holdings with an eye toward the Federal Reserve, which is expected to stop raising interest rates early in 2006 — though exactly when remains to be seen. And that uncertainty made it difficult to buy stocks.

"The economic news has been very good, but the Fed remains somewhat of a mystery," said Scott Wren, equity strategist for A.G. Edwards & Sons. "It's the same problem that's really held us back all month and it'll continue to be a problem until we get some more clarity from the Fed."

According to preliminary calculations, the Dow Jones industrial average fell 11.44, or 0.11 percent, to 10,784.82.

Broader stock indicators also fell. The Standard & Poor's 500 index lost 3.75, or 0.3 percent, to 1,254.42, and the Nasdaq composite index dropped 10.78, or 0.48 percent, to 2,218.16.

Bonds fell slightly, with the yield on the 10-year Treasury note rising to 4.37 percent from 4.37 percent late yesterday. The dollar lost ground against most major currencies, while gold prices rose.

Energy prices rose after the government's weekly inventory data showed minimal gains in crude oil reserves. A barrel of light crude settled at $60.32, up 50 cents, on the New York Mercantile Exchange.

While the last calendar week of trading for the year usually sees stocks rise as portfolio managers seek to boost returns, the usual year-end "window-dressing" was effectively hijacked this week with oil rising above $60 per barrel and bond yields inverting earlier in the week — with short-term bond yields outgaining long-term bonds. Combined with the uncertainty over the Fed, the markets may continue to tread water into 2006 despite strong earnings and a robust economy.

"We're just winding down the year, ending the year with these sort of small, middling gains, which to me makes sense because you've had opposing factors this year." said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "On the one hand you've had good earnings and a robust economy, but on the other hand, you've been fighting the Fed. The two canceled each other out."

With one trading day left in 2005, the Dow is up just 0.02 percent on the year, while the S&P has risen 3.51 percent and the Nasdaq has gained 1.96 percent.

In corporate news, Hilton Hotels Corp. rose $1.70, or 7.6 percent, to $24 after the hotel chain announced it would acquire British cousin Hilton Group PLC for $5.6 billion. The move would reunite the Hilton brands for the first time in more than four decades and create the world's largest hotel company.

Wal-Mart Stores Inc. said sales of gift cards were better than expected during the holidays, but the retailer did not offer any hard data. Wal-Mart nonetheless slipped 36 cents to $47.48.

Auto sales forecasts from Credit Suisse First Boston kept automaker stocks active. General Motors Corp. gained 40 cents to $19.01 even after CSFB said the struggling manufacturer would see double-digit sales declines. Ford Motor Co. dropped 3 cents to $7.81 on a similarly negative view, while DaimlerChrysler AG added 21 cents to $51.58 on a slightly better forecast.

Declining issues barely outpaced advancers on the New York Stock Exchange, where volume came to 1.03 billion shares, compared to 1.07 billion at the same point yesterday.

The Russell 2000 index of smaller companies fell 2.12, or 0.31 percent, to 677.96.

Overseas, Japan's Nikkei stock average jumped 0.92 percent. In Europe, Britain's FTSE 100 was up 0.28 percent, France's CAC-40 gained 0.34 percent for the session, and Germany's DAX index rose 0.21 percent.