Stocks extended steep losses, as the S&P 500 slid nearly 2 percent, as civil unrest in Egypt sparked widespread selling despite decent economic numbers.
The Dow Jones Industrial Average fell more than 165 points after touching 12,000 at the beginning of the session, and closing shy of that benchmarkfor the second straight session on Thursday. The last time the market closed above the benchmark was June 19, 2008.
Microsoft, Home Depot and Cisco fell.
The S&P 500 sank nearly 2 percent to below 1,280 after rising above 1,300 earlier in the session, while the Nasdaqdeclinedmore than 2.5 percent.
The last time the S&P 500 closed above 1,300 was Aug. 28, 2008. If the S&P 500 closes below 1,280.26 it will have closed below the prior eleven closes, a bearish sign, according to Rick Bensignor, market strategist at Dahlman Rose.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, skyrocketed more than 23 percent, to 20, the biggest spike in the VIX since June 4.
All key S&P 500 sectors sank, led by consumer discretionary, technology and telecom.
Stocks slumped as the protests in Egypt raised concerns the government was losing control, which would lead to instability in the region. The news was roiling markets worldwide.
The uncertainty surrounding the events also gave investors a reason to sell after five months of solid gains, and as the Dow and S&P bumped up against key thresholds, analysts said.
That and weak earnings news out of Amazon.com, Ford and Microsoft, provided another catalyst for investors to sell, said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.
The selling—which came from big institutions—was taking place amid significant volume, indicating more conviction in the moves, Detrick said.
"Egypt is definitely at the forefront today," agreed Paul Brigandi, senior vice president of portfolio management at Direxion Funds/Direxion Shares. "Overall, political unrest is never good for the market, especially when it has to do with the Middle East."
But the events in Egypt hit at a time when the market was bumping up against psychologically important benchmarks, and was beginning to "look fatigued" after rallying for some eight or nine weeks, said Brigandi, noting that the S&P 500 had been up 3 percent so far this year on top of a nearly 13 percent gain in 2010.
"The general consensus in the market is that a pullback was expected," Brigandi said. "And seeing a headline like this is giving people reason to believe this and sell risky assets."
In fact, many of the sectors that had outperformed in 2010—including the riskiest assets, such as small caps and emerging markets—fell the most on Friday. The Russell 2000 Small-Cap Index, for instance, slumped about 2.4 percent.
