Updated from 4:04 p.m. EDT

Stocks ended lower Friday but only marginally so, as investors generally shrugged off deflationary concerns and several analyst downgrades.

The Dow Jones Industrial Average ended down 34 points, or 0.4%, at 8678, while the Nasdaq was down 13 points, or 1%, at 1538. The S&P 500 was down 2 points, or 0.3%, at 944.

"The market is looking ahead rather than back so the weak economic data didn't really mean anything," said Tony Cecin, manager of Nasdaq trading at US Bancorp Piper Jaffray.

The consumer price index fell 0.3% in April, more than the 0.1% decline economist had expected. That sparked concern -- at least in the bond market -- that the economy could enter a deflationary spiral similar to the one seen in Japan. Excluding food and energy, consumer prices remained unchanged for the second month in a row, also below estimates of 0.1% growth in April. Late in the day, Roger Ferguson, vice chairman of the Federal Reserve's board of governors, said the chances of deflation were "remote."

The yield on the 30-year bond fell to a record low earlier in the session while yields on a 10-year note hit levels not seen in 45 years. A separate report showed housing starts slowed to an annualized 1.630 million in April after reaching 1.748 million the prior month.

Still, investors in the equity market seemed to focus more on an uptick in consumer confidence. The University of Michigan consumer sentiment survey came in at 93.2 in early May, well above forecasts for a reading of 87 and up from last month's showing of 86.0.

Sean Martin, head trader at A. Gary Shilling & Co., said investors were encouraged by this and he said they continue to look for better economic data going forward. He also noted that the so-called double witching, or the expiration of options on stocks and stock indices, could have impacted the market.

Also adding some support Friday was news that the Senate had passed a $350 billion tax-cut package that would reduce taxes on dividends next year then get rid of them for the next three years. Some pundits, however, complained that corporations aren't likely to feel the benefits of the cut since dividend taxes would be reinstated after three years.

In corporate news, Dell fell 3% to $31.19 after reporting a rise in quarterly profit and revenue but issuing guidance that merely matched analysts' expectations. Investors were hoping the company would perhaps raise its numbers. Salomon Smith Barney downgraded the stock on valuation concerns, citing limited upside in the next 12 months.

Still, the Amex Hardware index moved higher and financial issues rose even though Prudential Securities said it doesn't see things improving in the brokerage business anytime soon. A Prudential analyst lowered the industry to market perform from market outperform, saying the demand for corporate finance services remains anemic and brokerage shares are likely to trade in a range until that changes.

Elsewhere on the research front, Ericsson ( ERICY) gained more than 4% to $10.32 after being upped to neutral from reduce at UBS Warburg. The same brokerage lowered Nortel ( NT) to neutral from buy. Nortel fell 2% to $3.

Among other corporate news, Steve Case was re-elected to the board of AOL Time Warner ( AOL) despite opposition from several large shareholders. AOL rose 1.9% to $14.24.

Discount department store chain Kohl's ( KSS) posted first-quarter results that met its lowered guidance and said bad weather and a weak economy hurt earnings. Shares fell 0.7% to $53.40.

Walt Disney ( DIS) is considering the possibility of closing or even selling some of its Disney Stores amid weak performance, according to a report in The Wall Street Journal. Shares fell 0.1% to $18.44.

Meanwhile, shares of aircraft maker Boeing ( BA) rose 0.8% to $30.42 after the company secured an almost $15 billion contract with the Pentagon to modernize the U.S. Army's tanks and weapons, The Washington Post reported.

Imclone said Thursday after the close it is expecting news from the Nasdaq stock market on the possible delisting of its shares. The company has been grappling with tax issues left behind by disgraced CEO Sam Waksal.

Crude oil prices rose 40 cents to $29.14 in New York. The dollar was weaker against the yen and euro. The 10-year note rose 26/32, with its yield falling to 3.436%.

Overseas markets were mixed, with London's FTSE 100 up 1% to 4049 and Germany's Xetra DAX down 0.01% to 2989. In Asia, Japan's Nikkei closed 0.08% lower at 8117, while Hong Kong's Hang Seng lost 0.36% to 9093.

On Thursday, the Dow closed up 65 points, or 0.8%, at 8713. The S&P 500 gained 7 points, or 0.8%, to 947, while the Nasdaq rose 16 points, or 1.1%, to 1551.

If you liked this article you might like

Coming Week: Earnings Flood

Coming Week: Earnings Flood

Don't Write Off Inflation Threat

Don't Write Off Inflation Threat

No Quick Fix for Trade Gap

No Quick Fix for Trade Gap

Merrill's Doll Sees Stocks 'Muddling Through'

Merrill's Doll Sees Stocks 'Muddling Through'

Downhill From Profit Peak

Downhill From Profit Peak