Stocks declined, with the Dow and S&P on track to closer lower for a fourth day, as investor worries about a slowing Chinese economy and debt troubles in peripheral European countries sent materials, energy and other commodities lower.
TheDow Jones Industrial Average fell more than 90 points a day after stocks slumpedin the wake of Cisco'sdisappointing earnings. The tech bellwether continued to slump.
Boeing, Alcoa, and Cisco led the blue chips lower, while Walt Disney and Intel rose.
The S&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared above 20.
All key S&P sectors declined, led by materials, energy and financials.
Commodities and commodity-related stocks also fell as investors worried that China may raise interest rates to stem inflation, a move that could hurt global demand for commodities. Shares in China tumbledmore than 5 percent following the news.
Gold sankbelow $1,400 to near $1,385 an ounce, while the oil fell from a 25-month highto near $86 a barrel.
ExxonMobil , ConocoPhillips and Chevron fell, in addition to oil services companies Halliburton and Schlumberger .
And materials such as Freeport McMoran and CF Industries were the biggest decliners on the S&P, slipping more than 5 percent each.
The dollar reversed losses against the yen and trimmed declines versus the euro.
Raising rates in China is unlikley to make a big difference in China's economy, said Peter Cardillo, chief market economist at Avalon Partners. Friday's sell-off in the U.S., Cardillo said, was instead an excuse to "take some money off the table," Cardillo said.
Next week is filled with economic news, including retails sales, leading indicators and the Philadelphia Federal Reserve Survey, that Cardillo expects will confirm the economy is on an upswing.
"I’m optimistic we’ll have a strong year-end close here," he said.
Meanwhile, some strategists counter that stocks are likely to continue decliningahead of next week's options expiration.
“We got over-bullish in terms of options buyers and whenever we have that, you have to pull back,” Wayne Kaufman, chief market analyst at John Thomas Financial said on CNBC. “Options expire next week, so I think we can continue some weakness into next week.”
"Not so with fixed income, where the word fixed is in the name, and reflects the fact the cash flows coming form those instruments won’t change in nominal terms." In real terms, the cash flows are smaller, he added.
Shares of Starbucks fell after reports, confirmed by the company, that the coffee company would be introducing a single-service coffee product that would compete against Green Mountain Coffee Roasters's single-serve product. Green Mountain's shares slumped after the news in the Wall Street Journal.
Intel raised its quarterly dividendto 18 cents a share from 17.75 cents. The tech giant said it was on track for its best year ever.
Shares of Dow component Walt Disney rose, after initially falling late in Thursday's session when the entertainment conglomerate accidentally released earnings before the market closed. After hours, investors focused on the company's upbeat outlook. Disney's profit fell from a year ago, and was a penny shy of analysts' expectations.
Boeing led the Dow lower for a third session after it was downgraded by Sanford Bernstein to "market perform" from "outperform," citing risks with the airline maker's 787 aircraft.
In earnings news Friday, JC Penney shares fell after news the department store retailer's sales in the third quarter were hurt by a decisionto wind down its "Big Book" catalogue. The company posted better-than-expected profits, however.
D.R. Horton shares were slightly lower despite reporting a smaller-than-expected loss. The homebuilder cited slowing demand after the expiration of the homebuyer tax credit.
The Wendy's/Arby's Group sank after reporting a loss in the third quarter due in part to rising commodity costs as well as weak performance at its restaurant chains.
Nividia soared after the graphics-chip maker said sequential revenue will grow more than estimates have suggested. The company, however, reported a 21 percent drop in profits on sliding revenue.
Agilent Technologies also jumped after reporting a strong rise in profit.
Next week, a slew of retailers are expected to report earnings including industry leaders Wal-Mart , Target and Home Depot . In addition, tech giant Dell is also scheduled to post earnings.
Meanwhile, Yahoo fell after a report, which it denied,that the Internet company was laying off 2 percent of its workforce. Yahoo did not rule out job cuts.
Despite the market's retrenchment this week, Lawrence Creatura, portfolio manager at Federated Investors, believes stocks remain poised to move higher. Federated has forecasted the S&P will reach 1,350 over the next 12 to 18 months.
That's because stocks represent an attractive alternative to bonds as the Fed goes through with its plan to buy $600 billion in long-term bonds to stimulate the economy, Creatura said.
One result of that program is bonds will become even more expensive, and another, is inflation should result. Stocks, unlike bonds, provide inflation protection because most companies pass through added costs to consumers, "so their cash flows can adapt to chasing inflation environments," he said.
In the day's economic news, the Thomson Reuters/University of Michigan consumer confidence index roseto 69.3 in November, which was better than a reading of 69.0 forecasted among economists surveyed by Reuters. The index was at 67.7 in November.
Treasurys were volatile amid the Fed's first long-term bond purchases to boost the economy. The Fed is expected to buy $600 billion in bonds through the middle of next year, beginning with purchases of $6 billion to $8 billionon Friday. Details of the Fed's buying program disappointed investors, causing Treasury prices to slip and yields to rise.
Next week, the market will be focused on General Motor's return to the public markets in an IPO many expect will pricehigher than the $26 to $29 a share rangein GM's offering documents. Attention on Friday turned to the fact few retail investorswill have an opportunity to buy into the IPO when it's priced.
On Tap Next Week:
MONDAY: Retail sales, Empire State mfg survey, business inventories, credit card default rates reported, 13-F filings due, Motorola analyst meeting; Earnings from Lowe's and Nordstrom
TUESDAY: PPI, Treasury international capital, industrial production, housing market index, Microsoft shareholders meeting, Atlanta Fed Pres Lockhart speaks; Earnings from Home Depot, Wal-Mart and TJX
WEDNESDAY: Weekly mortgage applications, CPI, housing starts, oil inventories, St. Louis Fed Pres Bullard speaks, GM IPO pricing, LA auto show kicks off, Qualcomm analyst meeting; Earnings from Target and Applied Materials
THURSDAY: Weekly jobless claims, leading indicators, Philadelphia Fed survey, Cisco shareholder meeting; Earnings from Dell and Gap
FRIDAY: Bernanke speaks at ECB Central Banking Conference, Harry Potter movie premieres
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