The S&P 500 fell a point to 1,930 and the Nasdaq composite fell 14 points, or 0.4 percent, to 4,354.
THE DAY AFTER: Investors were dealing with the aftermath of the worst day in months for financial markets. Factors for the drop included weak corporate earnings from big companies such as Exxon Mobil, which also reported disappointing results this week. Economic sanctions on Russia that have increased tensions with the West also played a role, as did Argentina's debt default Wednesday. And there's also the general worry by investors that stocks are overpriced.
For the last two years, investors have typically stepped in to buy any major fall in the stock market. A sell-off would often be met the following day with modest buying. Traders said that Friday's selling, on top of what happened the day before, is not a good sign.
"The follow-through from yesterday's (market drop) is very telling," said Jonathan Corpina, a trader on the New York Stock Exchange with Meridian Equity Partners.
SAFETY IS KEY: Investors moved money into traditional safe havens: bonds and gold. The yield on the 10-year Treasury note fell to 2.50 percent from 2.55 percent. Gold rose $12.30, or 1 percent, to $1,293.60 an ounce.
GEOPOLITICAL UNREST: The conflicts in Gaza and Ukraine only added to investor worries on Friday. The 72-hour ceasefire between Israel and Gaza collapsed early Friday. In Ukraine, violence between government and pro-Russian separatists escalated despite the latest round of sanctions imposed on Russia by the U.S. and Europe.
The unrest in Ukraine weighed heavily on European markets. Germany's DAX fell 2.1 percent, France's CAC 40 fell 1 percent, and the FTSE 100 index fell 0.8 percent.
JOBS: The market's losses were held in check by a relatively strong July jobs report. Employers added 209,000 jobs to their payrolls. The unemployment rate did move higher, but it was likely caused by more people searching for work.
"In a nutshell, it's a good report," said Dan Greenhaus, chief strategist at brokerage firm BTIG in New York. "Not too hot, not too cold."
EARNINGS: Proctor & Gamble was a bright spot. The stock rose $2.81, or 4 percent, to $80.17. The consumer products giant said it earned an adjusted profit of 95 cents a share, four cents better what analysts had expected. P&G helped lift other consumer staples companies, making the industry the best performing industry in the S&P 500.
LinkedIn, the business social networking site, rose $17.61, or 10 percent, to $198.25 after its own results beat analysts' expectations.
LOW ENERGY: Benchmark U.S. crude for September delivery slipped 29 cents to $97.88 a barrel. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 77 cents to $105.26 in London.
Chevron, the world's second-largest energy company, fell 50 cents, or 0.4 percent, to $128.76. It had been down nearly 2 percent earlier in the day.
While the oil and gas giant reported earnings that were better than analysts had predicted, oil and gas production fell in the quarter. Also, part of Chevron's profit was related to one-time asset sales. Chevron's results echoed the comments from Exxon on Thursday, which also reported lower production in the quarter.
Carlo Piovano contributed from London. Matt Craft contributed from New York and Kelvin Chan contributed from Hong Kong.