Stocks fell heavily Friday as worries over the growing European debt crisis trumped some encouraging U.S. economic data.
Financials, materials and techs were the biggest decliners, pushing investors into safer plays like consumer staples.
"The emphasis of the markets right now is on the risks rather then the good news that's coming out of the economic numbers," Peter Dixon, senior economist at Commerzbank, told CNBC.
In the day's economic news: US consumer sentiment edged up in May, in line with forecasts, while one-year inflation expectations were at their highest since June 2009. Meanwhile retail sales rose 0.4 percentin April, weaker than the month before, while core sales—which exclude autos, gasoline and building materials—fell 0.2 percent.
Separate reports showed industrial production rose 1 percent last month and business inventories climbed 0.4 percent in March.
The Dow Jones Industrial Average was down more than 200 points, or almost 2 percent, after losing 114 on Thursday. Still, the blue-chip index is higher for the week by a few hundred points.
The S&P 500 and Nasdaq both shed over 2 percent. And the CBOE volatility index, widely considered the best gauge of fear in the market, popped above 30, after falling to near 20 in the past few sessions.
The Dow chalked up its 10th triple-digit move, either up or down, during Thursday's session. That followed a period of approximately a month-and-a-half when the Dow registered only three triple-digit moves.
Intel , American Express and Bank of America were among the biggest decliners on the Dow.
Travelers was the only Dow gainer.
Despite the bearish environment today, some pros are still bullish on the markets.
“We’ve been in a cyclical bull market for 14 months and the primary trend remains higher,” Art Nunes, portfolio manager at IMS Capital Management told CNBC. "We have plenty of liquidity on the sidelines and we have a healthy dose of bearish sentiment on the sidelines of people that have not participated in this market so we’re still bullish from here."
The latest hint of possible trouble for Wall Street banks is that the SEC is investigating whether the banks used their own moneyto bet against municipal bonds that they had sold, the Wall Street Journal reported.
Financials were the one of the biggest sector decliners with giant banks such as Citigroup , JPMorgan and Morgan Stanley all down sharply, with some regionals down 5 percent or more.
Meanwhile, former President Bill Clinton told CNBC that it is “time to lower the rhetoric and talk about the facts,” in reference to the government’s scrutiny of Wall Street. Clinton also said he does not believe that Goldman Sachs or its CEO Lloyd Blankfein did anything illegal.
The dollar hit an 18-month highagainst the euro. Oil fell below $72 a barrel, while gold slipped under $1,230 an ounce. Gold hit a new record high this week as investors flocked to the precious metal as a safe bet against currencies.
Meanwhile, credit-card issuers Visa , MasterCard , American Express and Capital One tumbled after the U.S. voted to limit fees charged on credit and debit card transactions.
Retailer JC Penney reported its profit rose but delivered a weak outlook, following other cautious outlooks from fellow department-store operators Kohl's and Nordstrom .
Tivo shares plunged more than 30 percent after the federal appeals court vacated the DVR provider's winin a patent battle with rival Echostar.
After the bell Thursday, chipmaker Nvidia beat earnings per share estimates by two cents in its latest quarter, while computer software makerCA fell short of consensus.
Videogame industry tracker NPD reported the worst year-over-year declinefor videogame sales since last July, and the fourth largest ever such decline.
Shares of major videogame publishers such as Activision, ElectronicArts and Take Two declined.
And US-traded shares of Sony fell after the company's annual profit forecast fell short of consensus by 23 percent.
BP shares slipped as the company continued to struggle to contain the giant oil spill in the Gulf of Mexico. The latest effort involves underseas robots threading a tube into the pipeto pump the oil into tankers above the surface.
Next week brings a handful of earnings reports, incuding Walmart and Hewlett-Packard, plus economic reports that include housing starts, producer prices and producer prices.
On Wednesday, the Fed will release the minutes from its last meeting. Traders will be watching closely to see what the debate on keep rates low is — and if anyone else joined Kansas City Fed President Thomas Hoenig in calling for an increase in interest rates.
On Tap For Next Week:
MONDAY: NY Fed Empire State survey; NAHB housing index; earnings from Lowe’s
TUESDAY: JPMorgan & Massey Energy shareholders meeting; Fed’s Pinalto speaks; housing starts; PPI, earnings from Home Depot, Wal-Mart & Hewlett-Packard
WEDNESDAY: FOMC minutes; Google developers’ conference; weekly mortgage apps; CPI; weekly crude inventories; earnings from Deere, Target, Applied Materials
THURSDAY: Toyota/NHTSA hearing; BOJ monetary policy meeting; weekly jobless claims; leading indicators; Philadelphia Fed survey; earnings from Computer Sciences, Gamestop, Staples, Dell, Gap
FRIDAY: Earnings from Ann Taylor
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