The S&P shed 1.10 points to 1,507.40 in midday trading, as financial stocks pulled back and investors remained cautious after Thursday's market plunge.

Shares of Ambac, a financial guarantor, fell $3, or 10.1 percent, to $26.57 and hit a 10-year low of $25.09. The stock has nose-dived in recent weeks as investors worry that borrowers will not be able to pay back their debts.

Shares of Titanium Metals dropped $3.15, or 9.3 percent, to $30.79 after the company's third-quarter profit and revenue came up well short of analyst estimates.

Merrill Lynch shares fell $5.36, or 8.6 percent, to $56.84 and reached a two-year low on reports that the Securities and Exchange Commission is investigating the company for allegedly striking deals with hedge funds that hid its exposure to mortgage debt. Deutsche Bank analyst Mike Mayo also downgraded the stock to "Hold" from "Buy."

Among the winners, Sprint Nextel Corp. gained 79 cents, or 4.8 percent, to $17.37, after a Deutsche Bank analyst upgraded the stock on valuation.

Embarq Corp. rose $2.30, or 4.5 percent, to $53.93, after the company backed its 2007 outlook. The telecommunications company reported third-quarter sales slipped 1 percent, but still topped Wall Street expectations.

Shares of Nabors Industries Ltd., an oil drilling contractor, rose $1.20, or 4.3 percent, to $29.18.