The Dow closed down 79.43, or 0.9 per cent, at 9,117.12, despite growing hopes for an interest rate cut.
The Nasdaq composite index dropped 27.13, or 1.6 per cent, to 1,626.49, and the S&P fell 9.90, or 1 per cent to 988.61.
For the week, the three main gauges were mixed, with the Dow up 0.6 per cent, the Nasdaq slipping 0.1 per cent and the S&P up 0.1 per cent.
While the reports suggest the economy could be hit by deflation, investors hope the Fed will cut rates at its next meeting to combat the trend of lower prices.
Guidant fell 61 cents to 39.95 in heavy trading after a subsidiary of the medical devices maker pleaded guilty to 10 charges, including shipping misbranded products and lying to government regulators.
Oracle rose after the maker of business software reported stronger than expected earnings. Oracle closed up 15 cents at 13.48 after several analysts upgraded the company's shares.
Oracle also said it planned a series of presentations to investors to explain its proposed acquisition of PeopleSoft. The board of PeopleSoft formally rejected Oracle's 16-per-share offer on Thursday. PeopleSoft declined 45 cents at 16.92.
Honeywell lost 5 cents to 27.86 even though the aerospace company reported 1.3 billion of new orders for jet parts and services.
Declining issues outnumbered advancers 9 to 5 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, which tracks smaller company stocks, fell 7.03, or 1.5 per cent, to 449.71.
AP