The market first fell on Intel's news, but rallied after Fed Vice Chairman Roger Ferguson suggested that core price inflation was under control and hinted at a moderating fiscal policy from the central bank. An afternoon rise in oil prices — which fed Wall Street's concerns about inflation — eroded those gains.

Meanwhile, news that the nation's service sector grew faster than expected last month countered a drop in consumer confidence, lending some stability to a market stifled recently by concerns about more interest rate increases and rising energy costs.

"In general, there's still a decent amount of momentum coming off the start of the year, which typically tends to support the market," said Steven Goldman, chief market strategist for Weeden & Co. "Stocks should hold up well assuming we don't get a sharp rise in long-term (bond) rates here."

According to preliminary calculations, the Dow Jones industrial average lost 3.92, or 0.04 percent, to 11,021.59.

Broader stock indicators also finished lower. The Standard & Poor's 500 index dropped 1.91, or 0.15 percent, to 1,287.23, and the Nasdaq composite index slid 8.51, or 0.37 percent, to 2,302.60.

Bonds fell for a third session, with the yield on the 10-year Treasury note rising to 4.69 percent from 4.64 percent late yesterday. The dollar was mixed against other major currencies, while gold prices tumbled.

Crude futures advanced as heightening political tension overseas created supply fears for the energy market. A barrel of light crude added 31 cents to settle at $63.67 on the New York Mercantile Exchange.

The Institute for Supply Management said its non-manufacturing index climbed 3.3 points to 60.1, versus economists' expectation of 58. Meanwhile, the University of Michigan reported its consumer sentiment index slipped 0.7 points to 86.7, while economists had predicted a 0.1-point rise.

The late-day decline left the major indexes mixed this week, with the Dow losing 0.36 percent and the S&P 500 off 0.17 percent, while the Nasdaq gained 0.68 percent.

Intel's warning sent its stock down 17 cents to $20.32, near a 52-week low of $19.88. The chipmaker lowered the midpoint of its projected quarterly revenue by $500 million, adding that its gross margins would also be impacted by less sales.

Novell Inc. further disappointed tech investors with its first-quarter earnings, which plunged sharply from last year as sales slid by 5 percent. The results prompted First Albany Capital to cut Novell to "underperform," pulling shares $1.63 lower to $7.90.

AK Steel surged $2.65 to $13.99 following a Pittsburgh Post-Gazette report that the firm is in talks to be acquired by United States Steel Corp., boosting shares across the steel sector. U.S. Steel rose 38 cents to $57.98.

Responding to shareholder pressure, fast-food chain Wendy's International Inc. said yesterday it may sell its Baja Fresh Mexican Grill restaurants and will speed up the spinoff of coffee chain Tim Hortons through an initial public offering. Wendy's jumped $2.10 to $60.54.

Google Inc. shares posted a second day of gains after the Web firm eased Wall Street's concerns about its growth prospects during a meeting with analysts. Google gained $1.73 to $378.18.

Declining issues led advancers by 19 to 13 on the New York Stock Exchange, where volume of 1.57 billion shares lagged the 1.8 billion shares that changed hands yesterday.

The Russell 2000 index of smaller companies fell 1.72, or 0.23 percent, to 738.44.

Overseas, Japan's Nikkei stock average slid 1.55 percent. Britain's FTSE 100 rose 0.44 percent, Germany's DAX index sank 1.07 percent and France's CAC-40 was lower by 0.4 percent.