Wall Street ended a tumultuous week with a sharp decline today, backtracking after two days of stunning gains as investors turned cautious and cashed in some of their gains.

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NEW YORK — Wall Street ended a tumultuous week with a sharp decline today, backtracking after two days of stunning gains as investors turned cautious and cashed in some of their gains. The Dow Jones industrial average fell more than 170 points but managed to close with its first weekly gain in 2008.

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 today 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 today 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 in stocks 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 for the week.

The holiday-shortened 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 a healthy process of trying to establish a bottom after weeks of sharp declines.

Investors had an initial burst of enthusiasm today, sending each of the major indexes up more than 1 percent, after upbeat profit reports from big names like Microsoft and word of a possible buyout of a troubled 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 Federal Reserve is expected to hold its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department plans to weigh in on the state of the job market Friday.

Signs that the job market may have further to fall added to the market’s anxiety. Media reports today that Goldman Sachs is laying off the bottom-performing 5 percent of its work force followed an announcement Thursday by Ford that it is offering buyouts and early retirement to 54,000 hourly workers and laying off some salaried workers, too.

“The economy is still up in the air because so much of it depends on people having paychecks,” said Kim Caughey, equity research analyst at Fort Pitt Capital Group.

Government bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.57 percent from 3.71 percent late Thursday. The markets grew concerned after rumors surfaced of big moves by hedge funds that some traders speculated stemmed from trouble at at least one fund.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude oil advanced $1.17 to $90.58 a barrel on the New York Mercantile Exchange.

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.

Despite giving up the early gains, Wall Street still appeared pleased by reports from U.K. newspapers that billionaire Wilbur Ross was in talks to acquire bond insurer Ambac Financial Group. Financial woes at many U.S. bond insurers have caused headaches in recent weeks for investors worldwide who have worried that tightness in the credit markets could worsen should one of the companies buckle under an inability to draw new business.

Ambac rose 21 cents to $11.54.

Word of Ross’ interest follows comments this week by New York state regulators that indicated they would consider lending support to shore up the struggling bond insurance industry. While uncertainty remains over what role regulators might play, the comments helped reassure Wall Street and made room for stocks to rally earlier in the week.

Other corporate news appeared to offer investors mixed readings on the economy.

Microsoft finished today down 31 cents at $32.94 after spending much of the session higher. The company raised its forecast for the rest of its fiscal year, which ends in June, and said its quarterly earnings jumped 79 percent. Microsoft cited the growing importance of its sales outside the U.S.

Diversified manufacturer Honeywell late Thursday reported fourth-quarter sales growth that topped Wall Street’s expectations. The company forecast weaker global economic conditions for the year but said it still expects to report double-digit growth in per-share earnings. The stock rose $2.05, or 3.7 percent, to $58.25.

Caterpillar, which like Honeywell, Boeing and Microsoft is one of the 30 companies that make up the Dow industrials, warned it sees “anemic growth” in the U.S. economy but also predicts “positive conditions” for its sales in most other markets. The maker of construction equipment rose 68 cents to $65.93 after reporting its fourth-quarter earnings rose 11 percent amid strong international growth.

The Russell 2000 index of smaller companies fell 4.12, or 0.59 percent, to 688.60.

Overseas, Britain’s FTSE 100 closed down 0.12 percent, Germany’s DAX index finished off 0.06 percent, and France’s CAC-40 fell 0.76 percent. Japan’s Nikkei stock average jumped 4.1 percent after falling sharply earlier in the week. Hong Kong’s Hang Seng index likewise surged 6.73 percent by the close.