Stocks were little changed on Friday as initial optimism after congressional leaders vowed to find common ground on a deal on tax and spending changes faded in the late afternoon.
The three major indexes had turned higher following the comments, but gave up the gains to trade flat. Worries about what the ultimate outcome of the "fiscal cliff" discussions will be have caused investors to pull out of stocks over the last two weeks. The S&P 500 is down 1.7 percent for the week.
Democrats said they recognized the need to curb spending and Republicans said they had agreed to put "revenue on the table" following a meeting with President Barack Obama.
"Everyone is realizing the policy decisions are not going to happen any time soon, but they could also have a large impact," said Kate Warne, investment strategist at Edward Jones in St Louis.
"So we're seeing the market in a wait-and-see mode, hoping that we'll see a resolution, but not being certain at this point."
Investors worry the economy could contract again if no deal is reached in Washington to avoid the large, automatic budget cuts and tax hikes that begin to take effect in the new year.
The Dow Jones industrial average <.DJI> dipped 18.97 points, or 0.15 percent, to 12,523.41. The Standard & Poor's 500 Index <.SPX> was off 1.32 points, or 0.10 percent, to 1,352.01. The Nasdaq Composite Index <.IXIC> edged up 0.43 points, or 0.02 percent, at 2,837.36.
Dell Inc helped limit the Nasdaq's gains after lower PC sales hurt the company's profit. Dell slumped 6.5 percent to $8.94.
More violence in the Middle East also kept investors wary after Palestinian militants nearly hit Jerusalem with a rocket for the first time in decades and fired at Tel Aviv for a second day.
Shares of Penn National Gaming Inc surged 29 percent to $48.55 after the owner of gaming and pari-mutuel properties said late Thursday it will split its business into two separate publicly traded companies - a gaming focused real estate investment trust and a gaming operator.
Sears Holdings Corp late Thursday reported a quarterly loss that was narrower than expected, but same-store sales fell on weak demand for electronics, sending shares down 19.1 percent to $47.27.
(Editing by Kenneth Barry)