Stocks closed out the worst quarter in almost three years amid fears over the global recovery and finished near session lows for the day as investors were reluctant to stay long ahead of the weekend.
For the quarter, the Dow and the S&P plunged more than 12 percent, while the Nasdaq tanked over 14 percent.
The Dow Jones Industrial Average tumbled 240.60 points, or 2.16 percent to finish at 10,913.38, led by Hewlett-Packard .
For the quarter, BofA was the worst performer on the blue-chip index, tanking more than 44 percent, while McDonald's was the biggest gainer, adding almost 4 percent.
The S&P 500 fell 28.98 points, or 2.5 percent to end at 1,131.42, while the Nasdaq declined 65.36 points, or 2.63 percent to finish at 2,415.40.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished near 43.
For the week, the Dow logged a gain of 1.32 percent, the S&P slipped 0.44 percent, while the Nasdaq dropped 2.73 percent.
Among the key S&P sectors, materials led the laggards for the week, while telecom gained. And for the quarter, utilities eked out a gain while financials and materials plummeted.
“When you took away the Fed protection, people feel that the Fed’s not supporting them so they’re not going to take risks,” said Joe Saluzzi, co-manager of trading at Themis Trading. “There’s a lot of hesitation—we saw quick bounces after the economic numbers.”
European shares ended lower, led by weakness in banks. DeutscheBank and Barclays declined.
Major banks in the U.S. were also trading lower, such as Morgan Stanley and Citigroup . Goldman Sachs also tumbled after Mediobanca Securities cut its price target on the financial giant to $106 from $120.
Billionaire investor Warren Buffett said his firm Berkshire Hathaway has started share buybacks, but the repurchases will not stop the company from making further acquisitions or spending on infrastructure. Buffett also reiterated his support for Bank of America .
Kodak plunged more than 50 percent after the company said it has hired restructuring lawyers, according to the Wall Street Journal. Investors punished the stock earlier this week, after the firm said it was borrowing $160 million against its credit line and adding to woes, two agencies slashed their ratings on the firm.
Yahoo is scheduled to host a press conference on Monday, although the topic of the event has not been disclosed.
On the earnings front, Micron Technology declined after the chipmaker swung to a quarterly loss as sales and margins were affected by declining prices for PC memory.
Ingersoll Rand plunged to lead the S&P 500 laggards after the industrial conglomerate slashed its third-quarter and full-year earnings forecast to below market estimates.
Amazon added to the previous session's losses after debuting its new Kindle Fire tablet, causing investors to wonder if the firm is able to keep up with demands and the device's effect on the firm's already skinny profit margins.
IBM surpassed Microsoft as the world's second most valuable tech company by market cap based on Thursday's closing prices.
McGraw-Hill Companies is in advanced talks to merge its S&P Indices business with CME Group Dow Jones Indexes.
On the economic front, consumer sentiment improved slightly in late September, according to the Thomson Reuters/University of Michigan survey. And business activity in the U.S. Midwest grew more than expected this month.
Personal income declined for the first time since Oct. 2009.
And overseas, China's manufacturing sector contracted for a third consecutive monthin September, suggesting that the world's second-largest economy may not be immune to global headwinds.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
On Tap Next Week:
MONDAY: ISM mfg index, construction spending, Fed's Lacker speaks, Oracle Open World, Supreme Court starts new term
TUESDAY: Factory orders, Bernanke speaks, Apple iPhone event, auto sales; Earnings from Yum Brands
WEDNESDAY: Weekly mortgage apps, Challenger job-cut report, ADP employment report, IS non-mfg index, oil inventories; Earnings from Costco, Monsanto, Marriott
THURSDAY: BoE announcement, ECB announcement, jobless claims, chain-store sales; Earnings from Constellation Brands
FRIDAY: Non-farm payroll, wholesale trade, consumer credit, Sprint's 4G plans unveiled
More From CNBC.com: