Stocks ended little changed, as investors showed reluctance to buy stocks until the market reestablishes the momentum that carried benchmarks to record highs last year.
The Dow Jones Industrial Average fell 17.89 points, or 0.1%, to close at 16444.76. The S&P 500 eked out just its second advance in six trading sessions this year, adding 0.64 point, or 0.1%, 1838.13.
The Nasdaq Composite Index shed 9.42 points, or 0.2%, to 4156.19.
Stocks have been slow out of the gate in 2014 after the S&P 500 posted a 29.6% gain last year, its best annual gain in 16 years. Recent declines in U.S. stocks have been modest, however, with the S&P 500 down 0.6% since capping last year with a record high.
"We've been pretty puzzled by the lack of enthusiasm at the beginning of this year," said Greg Peterson, director of investment research at Ballentine Partners, which oversees about $4.5 billion.
Mr. Peterson said his firm trimmed some of its U.S. stock holdings and bought shares from Europe and emerging markets at the end of last year, but still has outsize bets on U.S. stocks.
"People are very worried about the level of the markets, but if the economy strengthens and earnings meet expectations, then you have a setup for a pretty strong year again," he said.
Defensive stocks such as utility, health care and consumer staples led the way, while growth-sensitive technology and materials stocks lagged. Many of the market's recent highfliers, including Twitter and Tesla Motors, fell more than the broader market.
Agam Kothari, director of equity trading at Citigroup, said that many hedge funds got left behind early in the market's big rally last year and consistently bought stocks to catch up. So far in the new year, however, there has been less urgency to make big bets until a clearer direction is established, he said.
"There's no rush at this point," Mr. Kothari said. "There's no impetus to get involved and people are going to hang back until there's a firm tone."
Earnings reporting season unofficially started after Thursday's closing bell, when Alcoa posted fourth-quarter earnings growth that slightly missed expectations. The aluminum producer's stock fell 1.3% Thursday, then declined another 2.8% in after-hours trading.
Brian Lazorishak, portfolio manager and quantitative analyst at Chase Investment Counsel, which manages about $460 million in Charlottesville, Va., said he held onto his winning stocks through the end of last year, but now is watching for stocks to step back before adding to his positions.
"We'd welcome [a pullback] as a way to get into stocks at a cheaper level and scale back some of this short-term optimism a bit."
New unemployment claims declined by 15,000, slightly more than expected in the most recent week, according to the Labor Department.
Thursday's labor report is the second of three key readings this week and follows better-than-expected data on private-sector job growth on Wednesday. On Friday, a closely watched jobs report is expected to show nonfarm payrolls increased by 200,000 in December. The unemployment rate is expected to hold steady at 7%.
In Europe, the Stoxx Europe 600 gave up early gains to finish down 0.4%. The European Central Bank and Bank of England left benchmark interest rates unchanged, as expected, following better-than-expected sentiment data. ECB President Mario Draghi stressed that the central bank will remain accommodative for as long as necessary.
Asian markets fell, as investors expressed disappointment over Chinese inflation data. China's Shanghai Composite lost 0.8% to a 5 1/2-month low and Japan's Nikkei Stock Average slumped 1.5%.
The yield on the 10-year Treasury note fell to 2.964% from 2.991% late Wednesday.
February crude-oil futures fell 0.7% to $91.66 a barrel, while January gold futures added 0.23% to $1,229.30a troy ounce. The dollar rose versus the yen but fell against the euro.
Retailers were in focus after a string of earnings reports. Macy's rallied after the department-store operator said it would cut about 2,500 jobs, and close five stores, as part of a cost-cutting initiative aimed at saving about $100 million a year. Separately, Macy's said holiday same-store sales in November and December rose 3.6% above year-earlier levels.
Family Dollar Stores slid after lowering its full-year earnings expectations, as the discount retailer posted weaker first-quarter same-store sales and warned of continued revenue challenges in the new year.
L Brands fell after cutting its earnings guidance for the fiscal fourth-quarter as promotional activity led to lower-than-expected merchandise margins.
Bed Bath & Beyond declined after the home-furnishings retailer reported fiscal third-quarter earnings and revenue that fell shy of expectations. It also lowered its full-year earnings outlook, with gross margin narrowing and expenses increasing.
Write to Chris Dieterich at [email protected]