Stocks eased losses but remained lower amid concerns over European debt issues and a weak outlook among retailers reporting earnings.
The Dow Jones Industrial Average fell more than 60 points, after dropping more than 100 earlier. The blue-chip average rose Thursday in the face of weak economic news as investors rallied around LinkedIn's initial public offering. The social networking site for professionals registered huge gains in its first day of trading, more than doubling in their debut and prompting some analysts to warn about a bubble in social mediastocks.
TheS&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose more than 5 percent to more than 16.
All key S&P 500 sectors declined, led by consumerdiscretionary and industrials.
"There was some excitement definitely yesterday over the LinkedIN IPO, but it didn’t make too much headway," said Paul Brigandi, vice president of trading at Direxion Funds. "That set us up for the sell-off today."
The IPO and dovish comments from the Federal Reserve—indicating the central bank doesn't plan to hike interest rates soon—were among the only positives in the market this week, and neither was enough to stop selling driven by increasing evidence of a slowdown in global growth, Brigandi said.
On Friday, the German Bundesbank said the nation may start to see a slowdown in its economy, which would be a further blow to the European Union as it struggles to contain a debt crisis in peripheral nations. Also, Fitch downgraded Greece's credit rating to junk-bond status.
A global economic slowdown reduces global demand, which is why commodities sold off on Friday, continuing a trend that began earlier this month.
"The 'risk on' trades that have worked so well the last several months, we’re starting to see that unwind," Brigandi said.
Despite the big point drops in the Dow and other major indexes, and a nearly 6 percent spike in the VIX on Friday, volatility remains relatively low from a historical perspective, said Randy Frederick, director of trading at derivatives at Charles Schwab.
Friday's drop "might feel uncomfortable," Frederick said. But there have been only eight days this year that the S&P 500 has been down more than 1 percent, and only four of those days it down more than 2 percent. "This is not a volatile market," he said.
VIX futures, meanwhile, are only predicting a half point increase in the VIX over the next four months. "There's very little expectation of true volatility over the coming months," he said.
Much of the drop in commodities has been triggered by a gain in the dollar , which continued on Friday as the euro sank on the news of a slowing German economy and worries over the ability of the EU to restructure Greek debt.
The move in the dollar, as well as news of slowing global growth and euro zone debt troubles sent oil prices lower again. U.S. light, sweet crude fell to nearly $98 a barrel, while in London, Brentcrude fell below $110.
Retailers didn't get a good start on Friday. Gap plunged after cutting its profit outlook for the year, citing the rising cost of cotton. Aeropostale also sank after sales fell short of expectations. At least five brokerages cut their price targets for the teen retailer, while Stifel Nicolaus cut its rating on the stock to "hold" from "buy."
AnnTaylor Stores also fell despite a 21 percent gain in first-quarter earnings as it reported a drop in margins.
On the M&A front, Barnes & Noble skyrocketed after news Liberty Media has proposed buying the bookstore chainfor $1.02 billion.
In Europe, shares ended loweron worries about the Greek debt crisis.
On Tap Next Week:
MONDAY: Chicago Fed National Activity Index; St. Louis Fed President James Bullard speaks; Wind Power 2011 conference; earnings before-the-bell from Campbell Soup.
TUESDAY: New home sales, Richmond Fed Business Activity Survey, two-year Treasury note auction; Kansas City Fed President Thomas Hoenig speaks; Boeing Investor meeting; FDIC report on Q1 bank earnings.
WEDNESDAY: Mortgage applications, durable goods orders, oil inventories, five-year Treasury note auction; Minneapolis Fed President Narayana Kocherlakota speaks; USDA Food Prices Outlook, BlackRock shareholder meeting, ExxonMobil shareholder meeting, Yahoo investor day; earnings before-the-bell from Costco and Polo Ralph Lauren.
THURSDAY: GDP, USDA Agricultural Trade Outlook, jobless claims, corporate profits, natural gas inventories, seven-year Treasury note auction, money supply; earnings before-the-bell from Sony and Tiffany.
FRIDAY: Personal income and spending, consumer sentiment, and pending home sales.
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