Stocks succumbed to a late-day selloff but still had a stellar week, with the Dow logging its best weekly performance in more than five years.
The Dow Jones Industrial Average fell 127.04, or 1.4 percent, to close at 8852.22 after another crazy session that saw the Dow drop at the open, attempt to rally for the rest of the day, then sell off in that final hour of trading, an hour that has become infamous for its volatility. The S&P 500 andNasdaq lost 0.6 percent and 0.4 percent, respectively.
"Who's seen markets like this in their lifetime?" said Brian Gendreau, an investment strategist at ING Investment Management. "We are in uncharted territory here."
This already-jittery market wasn't quite sure what to follow today, digesting some encouraging earnings reports against dismal reports on housing and consumer confidence. All that came amid options expirations, which added even more volatility.
Indeed, the CBOE volatility index ended just below 70, after setting a new record above 80 earlier in the week.
"We categorize our clients into four groups," Gendreau said. They are: "The bailers, who want out no matter what, the rearview-mirror people, the stay-the-course investors and the opportunists."
"Add all these people up and you get the swings in the market!" Gendreau quipped.
Despite today's late selloff, the Dow ended the week up about 400 points, or 4.8 percent, its best percentage gain since March 2003. The S&P and Nasdaq also ended strongly higher for the week, while the Russell 2000 index of small-cap stocks lagged with a gain of just 1 percent.
It's been a wild ride these past two weeks. The Dow has posted triple-digit moves in each of the past 10 sessions. Put all those swings together and you get a whopping 7,400 points -- nearly 85 percent of the Dow's current 9,000 level.
Health-care stocks were the week's biggest gainers, and Johnson & Johnson had the most positive impact on the Dow, rising more than 12 percent this week. ExxonMobil led the S&P 500 with a weekly gain of 9 percent and Microsoft made the biggest positive contribution to the Nasdaq, at more than 11 percent.
The big buzz in the market today was about Warren Buffett, who wrote an op-ed in the New York Times titled: "Buy American. I Am." In it, the Oracle of Omaha reminds panicked investors of his cool-headed mantra: "Be fearful when others are greedy, and be greedy when others are fearful." Buffett, whose personal portfolio was previously all U.S. government bonds, said he's now buying stocks — and American stocks — because he's getting a "slice of America's future at a marked-down price."
(Why is Buffett buying stocks now? Click on the video above.)
You know when Warren Buffett starts buying stocks that we are at least within a 500-mile radius of the bottom.
"I think Warren Buffett is right," Gendreau said. His firm is of the belief that "we've already seen the bottom." He cites three reasons: The VIX over 30 (uh, check), the put-call issue over 1 (check) and the S&P 500 8 percent below its three-month moving average (Definite check! It's currently about 32 percent below that mark.)
"We’re going to continue to see a test — but a test of creating higher lows," Art Hogan, chief market analyst at Jefferies, told CNBC.
"We’ve really created a lot of value," Hogan said, citing the fact that the market has shed some $19 trillion in market cap in the past 12 months. "We have to be selective but I think there are buys out there," Hogan said.
"My guess is, we'll come out of this in a couple months," Gendreau said.
Thank goodness for Warren Buffett! We needed some optimism in this market and consumers sure aren't bringing it: The Reuters/University of Michigan gauge of consumer confidence posted its sharpest drop on record.
That took a toll on retailers such as Wal-Mart and Macy's . Worried consumers have already indicated plans to cut back on spending this year, making retailers nervous about the holiday season. (Check out our Holiday Central blogfor the latest on how the holiday season is shaping up for retailers.)
Industrials were the week's worst performers, falling 1.5 percent.
That was evident in Friday's trading. Caterpillar and United Technologies were among the top drags on the Dow, falling 7.2 percent and 4.1 percent, after a report showed that housing starts fell 6.3 percentin September to an annual rate of 817,000, the lowest pace in 17 years. Building permits, a gauge of future-building activity, dropped 8.3 percent.
Also dragging on the manufacturing sector, Honeywell, which makes everything from flight-navigation systems to air purifiers, reported results that slightly beat market expectations but trimmed its outlook. Its shares fell 5 percent.
Shares of Advanced Micro Devices rose 2.2 percent after the chip maker's results surprised analysts, given the economic conditions. AMD said its graphics chips showed real strength for the first time.
Google shares gained 5.5 percent after the Internet giant easily beat analysts' forecasts.
Schlumberger fell 6 percent. The oil-services giant reported earnings in-line with expectations but investors are worried that a global slowdown will take down demand for oil services.
So far, 82 companies in the S&P 500 have reported third-quarter earnings. Fifty-nine percent have topped estimates, 15 percent were in-line with forecasts and 27 percent missed.
Analysts expect to see the blended earnings growth rate, which combines actual numbers from those firms that have reported with estimates for companies that haven't, to have fallen 9.1 percent during the quarter.
The troubled housing and credit markets are hurting the broader U.S. economy, Boston Federal Reserve President Eric Rosengren said, adding that a proactive policy response that includes direct outreach to homeowners was needed.
As the economy worsens and unemployment rises, more Americans are having trouble paying off their credit card balances. That pushed up losses for credit card issuers, forcing them to tighten standards, which puts a further squeeze on cash-strapped consumers, analysts told CNBC.com.
Despite the credit freeze, merger talks between General Motors and privately held Chrysler are moving at a faster pace as potential lenders have thrown their support behind a deal between the two U.S.-based auto makers, CNBC has learned.
On Tap for Next Week:
MONDAY: Leading indicators; Earnings from Halliburton, Novartis, AmEx and Texas Instruments
TUESDAY: Fed's Stern speaks; Earnings from BlackRock, Caterpillar, Coach, DuPont, Pfizer, Schering-Plough, State Street, UnitedHealth and USBancorp
WEDNESDAY: Weekly mortgage applications; weekly oil inventories; Earnings from AT&T, Boeing, Boston Scientific, ConocoPhillips, GlaxoSmithKline, McDonald's, Merck, Northrop Grumman, Philip Morris, Wachovia, WellPoint, Wyeth, Amazon, Amgen, Pulte Homes, Sallie Mae
THURSDAY: Weekly jobless claims; weekly natural-gas inventories; Earnings from Altria, Bristol-Myers Squibb, DaimlerChrysler, Eli Lilly, Raytheon, SunTrust, Union Pacific, UPS, Xerox and Microsoft
FRIDAY: Existing-home sales; Earnings from LM Ericsson