The Dow capped a rocky week with a triple-digit loss Friday as worries over the growing European debt crisis trumped some encouraging U.S. economic data.
Still, all three indexes up more than 2 percent for the week.
"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 shed 162.79, or 1.5 percent, to close at 10.620.16.
The S&P 500 and Nasdaq lost 1.9 percent and 2 percent, respectively. 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.
For the week, the Dow gained 2.3 percent, the S&P added 2.2 percent and the Nasdaq shot up 3.6 percent.
Financials, materials and techs were the biggest decliners today, pushing investors into safer plays like consumer staples.
For the week, industrials, technology and consumer discretionary were the best performers, while utilities and staples were the worst.
Despite the bearish environment today, some pros are still bullish on the markets.
"This type of market is setting the stage for a very powerful second half on the upside — driven by economics," said Peter Cardillo, chief market economist at Avalon Partners. "A lot of this fear of the euro is disintegrating ... it's being overblown."
Financials were the one of the biggest decliners today, with giant banks such as Citigroup , JPMorgan and Morgan Stanley all down sharply, with some regionals down 5 percent or more.
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.
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 40 percent after the federal appeals court vacated the DVR provider's winin a patent battle with rival Echostar.
Nvidia skidded after the chip maker beat earnings estimates but its outlook fell short.
CA had just the opposite — it's earnings missed, while its outlook topped expectations. Still, the stock fell.
And US-traded shares of Sony fell after the company's annual profit forecast fell short of consensus by 23 percent.
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.
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.
Volume was slightly higher than normal, with about 1.5 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 9 to 1.
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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