NEW YORK (CNNMoney)
The Dow Jones industrial average tumbled 84 points, or 0.6%. The S&P 500 and Nasdaq declined 0.7%.
The Commerce Department reported that personal income fell 3.6% in January, which was the steepest month-to-month drop in 20 years. Personal income was expected to have dropped 2.4%, according to a Briefing.com consensus of economist forecasts. Personal spending notched up 0.2%, as expected.
Paul Donovan, UBS economist in London, said that recent highs on Wall Street have also made stocks sensitive to lackluster markets in Asia, particularly in China which issued a "softer than anticipated" manufacturing report, and Europe, which continues to be unsettled by political turmoil in Italy. Eurostat reported the euro zone unemployment edged up to 11.9% in January. Italy's unemployment was slightly lower than that, at 11.7%, but its youth unemployment has reached a staggering 38.7%.
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At 10 a.m. ET, the Census Bureau publishes data on construction spending, which is expected to have increased 0.5% in January.
Also at 10, the Institute for Supply Management will release its monthly manufacturing report, and the University of Michigan and Thomson Reuters will publish the final edition of their consumer sentiment index for February. The ISM Index is expected to have slipped to 52.4 in March, from the prior month's index of 53.1, according to Briefing.com consensus. Anything above 50 signifies expansion.
The University of Michigan consumer reading is expected to remain at 76.3 for February.
Meanwhile, investors are also taking a step back ahead of the $85 billion in automatic spending cuts set to go into effect Friday if no last minute deal is reached, although it may be weeks or months before that pain is felt.
The day's downward move comes as the major indexes hover just below record highs. The Dow is now 1.5% away from its all-time high reached in October 2007, while the S&P 500 is off less than 5%.
In corporate news Friday, Best Buy (BBY, Fortune 500)'s stock rose 6% after the electronics retailer reported that its quarterly revenue rose slightly year-to-year, despite the closure of 49 big box stores.
The company said that same-store sales rose nearly 1% in the U.S, but dipped nearly 1% internationally. Best Buy said its adjusted diluted earnings per share fell to $1.64, from $2.18 in the year-earlier quarter.
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Groupon (GRPN) shares increased 2% after the daily deals site announced that embattled CEO Andrew Mason would be replaced.
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Gap (GPS, Fortune 500) shares edged up following fourth-quarter earnings from the apparel maker Thursday that beat expectations.
Shares of Salesforce.com (CRM) added 4% following strong earnings announced after the bell.
European markets fell in midday trading, while Asian markets ended mixed.
The dollar rose versus the euro, the British pound and the Japanese yen.
Oil prices fell, while gold prices inched higher.
The price on the 10-year Treasury rose, pushing the yield down to 1.85% from 1.89% late Thursday. 
First Published: March 1, 2013: 9:48 AM ET
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