At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.14%, the S&P 500 index was down 0.12%, while the Nasdaq Composite index fell 0.14%.
Fears the U.S. will careen over a fiscal cliff grew after Senate Majority Leader Harry Reid said earlier that Jan. 1 may come and go without a deal to prevent tax breaks from expiring and deep spending cuts from kicking in at the close of 2012.
Investors' nerves grew calmer after reports emerged that the House of Representatives will reconvene on Sunday evening to try and hammer out a solution to avoid the fiscal cliff, which could tip the country into a recession next year, according to private and government estimates.
Lackluster economic data hitting the wire in the U.S. kept investors out of equities markets and into the safety of the U.S. dollar.
The U.S. Census Bureau reported earlier that new home sales rose by 4.4% to a seasonally adjusted 377,000 units in November, missing expectations for an increase to 378,000.
New home sales for October were revised down to 361,000 units from a previously reported 368,000.
The news sent investors seeking safety in the U.S. currency as did soft consumer confidence figures.
U.S. consumer confidence slumped to a four-month low, industry data showed on Thursday.
In a report, the Conference Board, a market research group, said its index of consumer confidence fell to 65.1 in December from a reading of 71.5 in November, whose figure was revised down from 73.7.
Analysts had expected the index to decline to 70.0 in December.
Not all of the news was bearish for equities.
Fewer people sought initial jobless claims in the U.S. than expected last week.
The U.S. Department of Labor said earlier the number of individuals filing for initial jobless benefits in the week ending Dec. 22 fell by 12,000 to a seasonally adjusted 350,000, lower than market calls for a decline of 2,000 to 360,000.
Jobless claims for the preceding week were revised up to 362,000 from a previously reported 361,000,
Continuing jobless claims in the week ended December 15 fell to 3.206 million.
Analysts were expecting that figure to fall to 3.200 million from last week’s revised figure of 3.238 million.
Leading Dow Jones Industrial Average performers included UnitedHealth Group, up 0.41%, Microsoft, up 0.37%, and IBM, up 0.40%.
The Dow Jones Industrial Average's worst performers included Cisco Systems, down 1.36%, Alcoa, down 1.26%, and JPMorgan Chase & Co., down 0.75%.
European indices, meanwhile, finished higher
After the close of European trade, the EURO STOXX 50 rose 0.43%, France's CAC 40 rose 0.59%, while Germany's DAX 30 finished up 0.26%. Meanwhile, in the U.K. the FTSE 100 finished unchanged.
On Friday, markets will track pending U.S. home sales and Chicago-area manufacturing data.