Stocks fell sharply Friday, with volatility expected to remain high due to the expiration of options, oil prices continuing their climb and bank worries slamming the financial sector.
The Dow Jones Industrial Average tumbled more than 100 points, pushing the blue-chip index well below the key 12000 mark.
All three major indexes -- the Dow, S&P 500 and Nasdaq -- were off more than 1 percent.
Adding to the volatility today is quadruple witching -- when contracts for stock index futures, stock index options, stock options and single stock futures expire in the same day -- which could bring some wild swings toward the end of the day.
"I'd stay with the big-cap names that do a lot of business overseas -- and wait for capitulation," Gregory Church of Church Capital Management told CNBC. "There’s going to be an opportunity to buy this market – we gotta go through a little bit more hell before we get there."
General Motors was the top decliner on the Dow amid news that the auto maker is re-evaluating the launch of several vehicles.
Ford announced that it may not break even by 2009 and that it was slashing production by 25 percent in the third quarter as auto makers grapple with a sharp slowdown in sales. Ford is even delaying the launch of the new model of its popular F-150 pickup truck in order to try to work through some inventory of the current model.
Ford and GM's financial arms may need to write down $1.1 billion and $1.5 billion, respectively, a Lehman Brothers analyst said, as slowdown has been a blow to U.S. auto credit.
Financials pared their losses, with the S&P 500 financial index off just 0.6 percent, as investors digested a swirl of dismal news.
Rumors of a profit warning from Merrill Lynch sent a ripple through the market. Merrill has refused to comment on the speculation but sources tell CNBC the rumors aren't true. Still, the stock dropped.
Regional banks have had a brutal week, with several cutting dividends and announcing plans to raise more capital to stay afloat.
Large-cap regional bank stocks are now in "capitulation mode" and will likely trade below fair value in the near term, said Merrill Lynch analyst Edward Najarian. The analyst cut his earnings estimates by an average 22 percent and 19 percent for 2008 and 2009, respectively. He also expects more banks to cut dividends and raise capital in the second half, including Bank of America and Wachovia .