Investors usually cash out ahead of a holiday weekend and, in this jittery environment, they found their reasons to sell today: a slew of bleak economic reports and a profit warning from Best Buy.
The Dow Jones Industrial Average was down about 50 points after the latest data showed a sharp drop in consumer sentiment. That piles on Thursday's 200-point slide, the index's 20th triple-digit move of the year. (Out of a possible 31 sessions.) The S&P 500 index and Nasdaq also declined.
Given the data and the Best Buy warning, "I think what you're really doing is adding a little bit of fuel to the fire as far as the bears are concerned," Jack Bouroudjian of Brewer Investment Group, told CNBC. "What it's really doing is taking the buyers and putting them to the sidelines."
Markets have been trading on a day-to-day basis and Friday's economic reports offered bleak views on everything from manufacturing to consumer sentiment.
U.S. import prices rose 1.7 percent in January, more than triple what economists had expected, amid sharp increases in prices of petroleum and food. Export prices increased 1.2 percent, the largest increase since January 1989. Meanwhile, manufacturing activity in the New York area deteriorated markedly in February, with the Empire State Manufacturing Index coming in at -11.7, the first time the gauge has fallen below zero in nearly three years.
Industrial production rose 0.1 percent, as expected, in January, following a similar weak uptick in December. Manufacturing output was flat and capacity utilization in the sector came in at its lowest level in almost a year.
The University of Michigan reported that consumer sentiment fell sharply in early February to levels associated with past recessions.
"The sentiment index has only been this low during the recessions of the mid 1970s, the early 1980s and the early 1990s," survey director Richard Curtin said in a statement.
Best Buy was one of the biggest decliners on the S&P after the consumer-electronics retailer warned of a profit decline in fiscal 2008 due to weak January sales and a pullback by consumers. The chain now expects earnings to be $3.05 to $3.10 a share, down from its earlier estimate of $3.10 to $3.20 a share.
Shares of rival Circuit City also declined.
Bond insurers remained in focus after New York state Insurance Superintendent Eric Dinallo told CNBC Friday that FGIC, the third largest bond insurer, plans to split into two companies. The company recently lost its triple-A bond rating because of subprime-related losses.
The two biggest U.S. bond insurers, MBIA and Ambac Financial Group, told CNBC Thursday that they don't need a government-led bailout despite billions of dollars of losses from subprime-related debt.
UBS shares came under pressure again today after the bank said it could face an additional $18 billion in 2008 writedownsfrom bad subprime mortgages. Shares were down 3.7 percent in premarket trading.
Whole Foods, the biggest decliner on the S&P, tumbled after Lehman Brothers downgraded its rating on the upscale-grocery chain to "underweight."
Shares of Kraft Foods advanced after Warren Buffet's Berkshire Hathaway said Thursday that it now has an 8.6 percent stake in Kraft.
Pfizer, Eli Lilly and Schering-Plough advanced after Goldman Sachs analysts raised their rating on the pharmaceutical sector to "attractive" from "neutral," based on valuation, and said these are their three favorite stocks in the sector.
Airline stocks advanced amid speculation that a Delta - Northwest merger will be announced next week. The S&P airline index rose 1.4 percent.
Trading volumes are likely to be thin ahead of a long weekend in the U.S., with Wall Street closed Monday for Presidents' Day.
Taking comments about "sluggish" growth from Federal Reserve Chairman Ben Bernanke a step further, former Fed Chairman Alan Greenspan, after the closing bell, said that the economy is "clearly on the edge" of a recession and that the situation will continue to erode until housing prices stabilize. Bernanke, while gloomy in his congressional testimony, maintains that the economy will be able to avert recession.
On Thursday, the markets finished lower after three straight gains as investors, looking to trade on any news, jumped on comments from Federal Reserve Chairman Ben Bernanke that economic growth will be "sluggish."
Write to Cindy Perman at email@example.com.