Friday may be February 29, a day that only comes around once every four years, but for the market, it marks the end of a fourth straight down month.
Stocks closed sharply lower Friday after a trio of economic reports stirred recession fears and AIG reminded investors that there are more shoes to drop, posting a huge quarterly loss.
The Dow Jones Industrial Average lost 2.5 percent, with all 30 components finishing in the red. The S&P 500 index lost 2.7 percent and the tech-heavy Nasdaq declined 2.6 percent.
The two-day sell-off wiped out all of the gains from the rally at the beginning of the week and the Dow finished down just under 1 percent for the week. For the month, the Dow lost 3 percent, making February the fourth straight down month. Only two of ten main S&P 500 sectors were up for the month -- energy and materials. Even consumer staples declined.
For sure, 2008 has been a wild year -- a couple of months, really -- for stocks. The Dow is now down 7.5 percent since the end of 2007.
"My sense of it is that oil is really, really concerning people," said Bruce McCain, head of strategy at Key Private Bank's investment-management unit. "Not only because it's indicative of costs that we all face but also the underlying concern about inflation."
Crude oil pulled back in U.S. trading Friday to settle at $101.84 a barrel, after earlier touching a new high above $103 a barrel. The dollar continued to spiral as the euro soared to a new high of $1.5238 against the dollar.
If we've seen the lows of this cycle in January, McCain says we should be ready to test those lows by about the end of March. That would take a lot of the anxiety out that we've been seeing in the market. Then, firms should be ready to start delivering the "buy" ratings.
Until then, keep your seatbelts fastened and your arms inside the investment vehicle at all times.
In economic news Friday, the National Association of Purchasing Managers-Chicago reported its index of regional business conditions, fell to 44.5, the lowest since December 2001, from 51.5. Economists had expected a less sever slide to 49.7.
The report's subindexes were mixed, but "employment plunged catastrophically" to 33.5 from 47, notes Ian Shepherdson, chief U.S. economist at High Frequency Economics. Combined with other weak regional reports, including Philadelphia New York and Cincinnati, Shepherdson said, "We now expect the economy to shrink in the second quarter ... the only factor preventing another drop in the third quarter is the tax rebates."
The regional reports are seen as a precursor to a national reading on manufacturing, due out on Monday.
Meanwhile, the University of Michigan said its gauge of consumer confidence came in at 70.8 in a final February reading, up from a midmonth reading of 69.6, but down from 78.4 in January. It was the lowest reading since February 1992.
A report from the Commerce Department showed consumer spending has idled.
Personal spending increased 0.4 percent as income rose 0.3 percent, the Commerce Department said. Economists had expected both gauges to rise a more modest 0.2 percent. Some of the gain was due to inflation, as the personal consumption expenditure price index climbed 2.2 percent in annual terms. Real spending, which is factored into GDP, was actually unchanged in January; it's been unchanged in three of the past four months.
Dell also talked about the pinch of the consumer pullback in its earnings report. The computer maker posted a lower-than-expected quarterly profit and warned that consumers may reduce spending. The company said it was making efforts to improve profitability by shedding jobs and shaking up its business.
Friedman, Billings, Ramsey & Co. upgraded its rating on Dell to "outperform" from "market perform," saying it expects margins to improve and that emerging-markets growth should remain strong.
American Insurance Group, the Dow's biggest decliner, joined the ranks of the biggest losers of the credit crunch, posting a $5.29 billion loss amid writedowns and losses of nearly $15 billion. AIG's CEO said the company expected the housing market to stay weak and credit uncertainties to persist.
UBS said Friday that losses from the credit crisis will likely top $600 billion -- more than triple what's been reported so far -- with more than half of that being absorbed by banks and brokers.
Punk Ziegel lowered its earnings forecast for several financial institutions, including Goldman Sachs , Merrill Lynch and Citigroup , citing more provisions for bad loans to come.
Meanwhile, the bailout plan for Ambac ran into trouble when regulators demanded that banks involved move put up more capital, CNBC has learned. Confidence remains that the deal will still happen and talks are expected to continue over the weekend.
Moody's said Friday that Ambac remains on review for a possible credit downgrade, though if the bond insurer can meet target capital levels, it will hold on to its "AAA" rating.
Among bond insurers, there's been a lot of talk about Ambac and MBIA, not so much about Assured Guaranty. Well, Friday, Assured got its day after billionaire investor Wilbur Ross told CNBC he plans to buy up to a $1 billion stake in the company. The purchase, done through WL Ross & Co, gives Assured a much-needed capital boost to preserve its triple-A credit rating.
Some good news on the earnings front came from media company Viacom , the owner of MTV, which reported a 16 percent gain in fourth-quarter earnings and said its advertising business had not been hurt by the economic slowdown.
But in the housing sector the outlook was still bleak, as mortgage rates continued to rise. A survey by Freddie Mac showed that 30-year mortgage rates averaged 6.24 percent compared to 6.04 percent a week earlier, while 15-year mortgages increased to an average of 5.72 percent from 5.64 percent.
Slamming a plan to bring relief to mortgage borrowers, U.S. Treasury Secretary Henry Paulson said homeowners who could afford their mortgage should honor their obligations and that the Bush administration had no interest in bailing out housing speculators.
MF Global shares tumbled after at least four firms downgraded their ratings on the stock. UBS and Credit Suisse cut their ratings to "neutral," citing the company's ineffective risk management. A day earlier, MF Global disclosed that it had a rogue trader, who cost the company $141.5 million due to unauthorized wheat trades.
On tap for next week:
MONDAY: ISM manufacturing index, February auto sales
TUESDAY: Ohio, Rhode Island, Texas and Vermont primaries
WEDNESDAY: Factory orders, ISM services index, Fed beige book
THURSDAY: Weekly jobless claims, ECB meeting
FRIDAY: February jobs report
Send comments to Cindy.Perman@nbcuni.com.