Insurers plunged on expectations that losses from the catastrophe will eat into their fourth-quarter earnings. AIG fell 5 percent, Genworth Financial and Arch Capital Group 4 percent and Hartford Financial Services Group 3 percent.
In the last big piece of economic news before Tuesday's presidential election, the Labor Department said employers added 171,000 jobs last month, while the unemployment rate ticked up to 7.9 percent. More jobs were added in the previous two months than was first reported, the government said.
The economy is the top issue in the election, but few expect the latest jobs numbers — solid, but not great — will sway many voters. Stocks in Europe rose after the report was released at 8:30 a.m. Eastern time, but fell back after the U.S. rally faded.
The Dow Jones industrial average rose as much as 57 points in the first minute of trading, then turned negative before a half-hour had passed.
The Dow was down 42 points at 13,191 at 12:15 p.m. Eastern time. The Standard & Poor's 500 index fell three to 1,425. The Nasdaq composite index dropped 9 to 3,010.
Insurers were not the only companies to suffer in Sandy's wake. Delta Air Lines said it lost $45 million in revenue last month because of flight cancellations during and after the storm. Shares fell 12 cents to $9.59.
And Verizon Communications Inc., whose downtown Manhattan facilities are still without power, said the storm would have a "significant" effect on its fourth-quarter earnings. Verizon said it could not yet estimate the cost of the storm, which downed cell towers across the region. Its stock fell a nickel to $45.09.
Stocks of consumer companies rose strongly, with Internet travel sites priceline.com and TripAdvisor Inc. leading the S&P 500. The companies surprised investors with better-than-expected third-quarter earnings after the market closed on Thursday. TripAdvisor rose $6.12, or 21 percent, to $35.53. Priceline added $61.24, or 10 percent, to $647.34.
Starbucks rounded out the S&P 500's top three gainers, adding $4.47, or 10 percent, to $51.09. The ubiquitous coffee vendor said late Thursday that global revenue at cafes open at least a year rose 6 percent during its fiscal fourth quarter, which runs from July through September.
Home decor retailer Restoration Hardware Holdings Inc. shot up $7.74, or 32 percent, to $31.74 in its first day of trading on the New York Stock Exchange.