Stocks avoided a major selloff Friday but the Dow remained below its November low as worries persisted that the government could step in and nationalize some banks.
The market had shed more than 2 percent at one point, but reassurances from the White House that it favored keeping banks out of the government's hands slightly cheered investors.
The Dow Jones Industrial Average was off 1.3 percent after falling to its lowest intraday level since October 1997.
The S&P 500shed about 1.2 percent, and theNasdaq briefly turned positive and ended just slightly to the downside.
Fears of bank nationalization and the potential for a wipeout of shareholder value has plagued the market all week. More and more analysts are saying that nationalization isn't a matter of "if" but "when."
Statements from the White House that it preferred not to nationalize banks briefly assuaged market fears, but Citigroup finished sharply lower though Bank of America pared much of its earlier losses..
Wall Street was rattled by several comments alluding to nationalization out of Washington.
Sen. Chris Dodd said today that banks may have to be nationalizedfor some period of time, which sent stocks spiraling further. This comes a day after Fed Chairman Ben Bernanke made comments at the national press club that were interpreted as referring to nationalizationin a speech, which got traders buzzing.
But the White House jumped in to try to assuage the market, saying it supports banks remaining private.
This comes after a selloff Thursday that saw the Dow crash through its November low to settle at a six-year low.
Several big caps hit multiyear lows today: General Motors crashed to its lowest since 1938, Alcoa hit a 20-year low and General Electric hit its lowest in more than 10 years. Boeing and Berkshire Hathaway both fell to their lowest in five years, Kraft hit an all-time low since going public in 2001.
Trading was fairly heavy, with volume approaching 2.1 billion shares, but market breadth was sharply negative, with losers beating gainers 3 to 1.
Traders' disappointment in the lack of details from the Obama administration on its stimulus plans has been a main driver of the market this week. And, when specific plans for the mortgage-rescue plan emerged, stocks sold off.
"This market sold off quite frankly because it did not like the plan period," Jack Bouroudjian, a principal at Brewer Investment Group, told CNBC this morning.
It all comes down to the banks, Bouroudjian said.
"The banking sector is the heart blood of capitalism. Unless it gets healthy, the rest of the sectors are going to spin their wheels," he said.
In the day's only economic data point, consumer prices rose 0.3 percentlast month, the first gain since July; core CPI, which excludes volatile food and energy costs, rose 0.2 percent.
Switzerland’s tax and banking laws came under sharp scrutiny as US authorities widened a probe into UBS , suing for information on 52,000 clients. The Swiss bank agreed to large fines earlier in the week in an attempt to settle criminal charges.
American depositary shares of UBS tumbled more than 10 percent, pushing the stock under $10 on the New York Stock Exchange.
Bank of America is also under legal scrutiny, as chairman and chief executive Kenneth Lewis was subpoenaed by New York Attorney General Andrew Cuomo last week. Cuomo is investigating whether the bank violated state law by withholding information from investors, a source familiar with the case told CNBC.
"Would I be buying the equity in Citi and Bank of America here? I mean, it's very cheap, but I think the banks survive; I don't think the equity survives," Steve Auth, CIO of global equities at Federated Investors, told CNBC.
(Click on the video at left to watch the interview.)
Crude oil pulled back a few dollars, trading between $37 and $38 a barrel, while goldpopped above $1,000 a troy ounce.
"The time of stock and bond investing only, is over. And we have to realize that," said Heath Bray, a VP at Wealth Trust Arizona, told CNBC.
Tough times continued for the auto sector as General Motors loss-making unit Saab said it would seek legal protection from creditors as it scrambles to restructure and gather new funding.
And missing Texas billionaire Allen Stanford has been found in Fredericksburg, Virginia and served with a complaint accusing him of an $8 billion fraud.
In earnings, Lowe's reported a sharp drop in quarterly profit as the home-improvement retailer slashed prices to try to lure penny-pinching shoppers. Earnings fell to 11 cent a share, just below analyst estimates. Lowe's outlook fell short of expectations.
Also, Barrick Gold shares gained after the company beat analyst estimates with a profit of 32 cents per share.
And JCPenney beat forecasts but issued a disappointing forecast.
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