Wall Street ended a tumultuous week with a sharp decline Friday, backtracking after two days of stunning gains as investors turned cautious...

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NEW YORK — Wall Street ended a tumultuous week with a sharp decline Friday, backtracking after two days of stunning gains as investors turned cautious and cashed in some of their winnings. The Dow Jones industrial average still managed to record its first weekly advance of 2008, even as it fell more than 170 points on the day.

The week, which started with a 465-point drop in the Dow soon after the market opened Tuesday, showed that the stock market is still fractious but may be going through healthy process of trying to establish a bottom after weeks of sharp declines.

The Dow fell 171.44, or 1.4 percent, to 12,207.17. The Dow had been up more than 100 points in early trading.

Microsoft, one of the 30 Dow stocks, declined 31 cents Friday to close at $32.94 a share, and was down 7 cents, or 0.2 percent, for the week. Boeing, also a Dow stock, fell 59 cents Friday to $77.03 and was off $1.37, or 1.7 percent, for the week.

Broader stock indicators also fell. The Standard & Poor’s 500 index fell 21.46, or 1.6 percent, to 1,330.61. The technology-heavy Nasdaq composite index fell 34.72, or 1.5 percent, to 2,326.20.

Despite the huge moves seen during the week, stocks finished not far beyond where they began, with the Dow adding 108 points, or 0.9 percent. The S&P 500 ended the week up 0.4 percent and the Nasdaq lost 0.6 percent.

The market had been anticipating another 50 basis-point reduction in the Federal Reserve’s target rate at the two-day meeting that starts Tuesday.

“The consensus is now 25; or the 75 basis points could have been an early jump, and they won’t cut anything,” said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.

“We still have fears of what will happen next week,” according to Art Hogan, chief market strategist at Jefferies & Co. “This market is groping for a bottom.”

Investors had an initial burst of enthusiasm Friday, sending each of the major indexes up more than 1 percent, after upbeat profit reports from Microsoft and word of a possible buyout of a trouble bond insurer.

But the advance proved short-lived and the eventual decline wasn’t surprising given that investors putting down bets ahead of the weekend were coming off two days of big gains — including 400 points in the Dow.

“People may be looking to take some profits off the table in this volatile market. And there’s a lot of activity that’s coming up next week,” Scott Fullman, director of investment strategy for I. A. Englander & Co., said during the day’s back-and-forth trading.

President Bush is scheduled to deliver his State of the Union address Monday. Meanwhile, the Fed holds its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department will weigh in on the state of the job market on Friday.

With Friday’s decline, the market might well be following the pattern of past corrections, when huge gains were often followed by some retrenchment.

Many market watchers consider such backing and filling a sign of health. However, with much economic uncertainty ahead, investors may need months before they can decide whether to take the market solidly higher.

Investors are looking for clues about whether the market is due to add to its gains after a brief hiatus or whether another pullback is in the offing. Despite the increases logged this week, stocks are still down sharply in the new year.

“The market is extremely sensitive to any news that’s out there. A year ago, it brushed off a lot of stuff. Now, it’s just the opposite, and we’re seeing reactions nearly immediately when things come out,” Fullman said.

Material from MarketWatch was used in this report.