Worst week for S&P 500, Nasdaq since May 2012

Cashin: What can Fed do next?
Cashin: What can Fed do next?   

U.S. stocks fell sharply on Friday, with benchmark indexes falling for a third week in a row, as computer-chip manufacturers led the losses after Microchip Technology lowered its sales outlook.

"With the Fed going away, and the slowdown in Europe, the market is trying to figure out are these valuations fair, that's what this whole week has been about," said JJ Kinahan, chief strategist at TD Ameritrade..

Equities fell further after Standard & Poor's downgraded its outlook for France to negative from stable.

The CBOE Volatility Index, a measure of investor uncertainty, rose above 20 for the first time since early February, and spiked 13 percent to 21.24.

"Adding insult to injury after the bell on Thursday was a revenue warning from the CEO at Microchip Technology," noted Andrew Wilkinson, chief market strategist at Interactive Brokers.

"Investors may have to worry beyond Friday about the consequences of the Microchip warning," he added.

Juniper Networks declined after posting initial third-quarter results that came in below its own forecast.

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Symbol
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Price
 
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DJIA
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S&P 500
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NASDAQ
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After rising as much as 98 points in the early going, the Dow Jones Industrial Average dropped 115.15 points, or 0.7 percent, to 16,544.10, with Intel fronting blue-chip losses that extended to 21 of 30 components. Coca-Cola led gains. The Dow fell 2.7 percent from the week-ago close, and slipped into negative terrain for the year, down 0.2 percent from the end of 2013.

Down 3.1 percent on the week, and up 3.1 percent for the year, the S&P 500 dropped 22.08 points, or 1.2 percent, to 1,906.13, with technology hardest hit and utilities faring best among its 10 major sectors.

The Nasdaq declined 102.10 points, or 2.3 percent, to 4,276.24, leaving it off 2.3 percent on the week and up 2.4 percent on the year.

For every share rising, nearly four fell on the New York Stock Exchange, where nearly 949 million shares traded. Composite volume cleared 4.5 billion.

Traders on the floor of the New York Stock Exchange.
Getty Images
Traders on the floor of the New York Stock Exchange.

The dollar gained against other the currencies of major U.S. trading partners and dollar-denominated commodities including oil and gold were mixed.

On the New York Mercantile Exchange, crude futures for November delivery turned higher, up 23 cents, or 0.3 percent, at $86 a barrel and the December gold contract fell $3.60, or 0.3 percent, to $1,221.70 an ounce.

The yield on the 10-year Treasury note, used to determine mortgage rates and other consumer loans, fell 2 basis points to 2.292 percent.

Ahead of the open, the Labor Department reported U.S. import prices fell in September for a third month as the price of petroleum prices fell and a stronger dollar made it cheaper for Americans to purchase European goods.

"Falling energy prices and interest rates have some worrying they are signaling bad things about the economy; however, these two factors will likely pave the way for continued improvement in corporate earnings expectations," Nick Raich, CEO of the Earnings Scout, wrote in emailed research.

"Few have noticed third-quarter 2014 earnings are off to a solid start," he added.

On Thursday, U.S. stocks sank, erasing all and more of the previous day's rally, as investors bypassed U.S. corporate earnings and economic reports to focus on global concerns, including Europe's softening economy.

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US import prices drop
US import prices drop