NEW YORK – Stocks tumbled Friday, with the Dow losing almost 200 points on Wall Street's worst day so far in 2005, as disappointing results from IBM and mediocre industrial production figures pointed to a slowing economy and fed investors' worries.
The Dow Jones industrial average (search) was down 198.41 points, or 1.93 percent, to end at 10,080.34. The Standard & Poor's 500 Index (search) was down 19.43 points, or 1.67 percent, to close at 1,142.62. The Nasdaq Composite Index (search) was down 38.56 points, or 1.98 percent, to finish at 1,908.15.
For the week, the Dow was down 3.55 percent, the S&P 500 was off 3.29 percent and the Nasdaq was down 4.56 percent.
All three indexes set fresh closing lows for the year. The Dow suffered its worst weekly decline since March 2003, while the S&P 500 and the Nasdaq had their biggest drops since August 2004.
Stocks have now erased the gains built up in a rally that started around November's presidential election.
The next level investors were focusing on for the Dow to reach is 10,000, said Warren West, principal at Greentree Brokerage Services.
"We've broken through anything technicians might have said were support points and now we're looking at sentiment levels such as round numbers," West added. "We're looking at the Dow at 10,000 as the next real test of investor psychology."
"Everyone is leaning on this market pretty hard. This is a white knuckle time," said Jon Brorson, managing director of growth equities at Neuberger Berman.
International Business Machines Corp. (IBM), the world's largest computer company, tumbled 8 percent to $76.70, a day after reporting lower-than-expected earnings. That sparked another sell-off on Wall Street and sent shudders through stock markets worldwide.
Crude oil prices were lower and continued a two-week downtrend, with a barrel of light crude settling at $50.49, down 64 cents, on the New York Mercantile Exchange (search).
Economic reports contributed to the negative mood, when industrial production and University of Michigan consumer sentiment reports came in on the weak side Friday.
"Clearly the economy is downshifting because of the persistently high level of oil prices over the last year and the raising of short-term interest rates," Keating said.
"That's really the issue. There needs to be recognition on the part of the Federal Reserve that they will pause before the year end (in raising rates) and not force the economy into a recession."
Among tech shares falling, network computer maker Sun Microsystems Inc. (SUNW) lost 7.6 percent to $3.66 after it missed expectations. Hewlett-Packard (HPQ) shed 4 percent to $20.84 and PC maker Gateway fell 3 percent to $3.81.
A sharp rise in oil prices so far this year is to blame for the jump in import prices, the Labor Department (search) said. Import costs rose 1.8 percent in March, but even without oil, prices rose 0.3 percent, which is still more than the 0.2 percent rise economists had expected.
"There's a lot of evidence that when we have oil averaging $53 or $54 per barrel, that's inflationary, and we got a whiff of that today in the import prices," said Peter Cardillo, chief strategist and senior vice president with S.W. Bach & Co. "It doesn't help that we're starting to see the economy enter a slowing mode heading into the second quarter here."
An already uneasy market was disappointed with the Federal Reserve's (search) report that overall industrial production rose 0.3 percent in March, up from 0.2 percent in February. The Fed noted that much of the increase came from utility production due to a colder-than-average month, and other manufacturing activity declined for the first time in six months.
The University of Michigan's (search) preliminary reading of its April index of consumer sentiment fell to 88.7 from March's final reading of 92.6, according to a report released on Friday and seen by market sources. Economists had forecast a more modest dip to 91.5.
General Electric (GE) rose 25 cents to $35.75 after the industrial and media conglomerate reported a 25 percent jump in first-quarter profits, with nine of the company's 11 disparate divisions reporting double-digit growth. The company's forecasts for the second quarter and full year were in line with Wall Street's estimates.
Citigroup (C) beat Wall Street's expectations for its quarterly profits by 2 cents per share, with profits rising a modest 3 percent year-over-year. The financial company also said its board had authorized the repurchase of an additional $15 billion in stock. Citigroup added 35 cents to $45.75.
The lagging pharmaceutical sector saw new life after Genentech Inc. (DNA) reported strong results from trials of its Avastin drug in breast cancer patients, and Ely Lilly & Co. (LLY) received a favorable patent ruling on its best-selling anti-psychotic drug Zyprexa. Genentech surged $10.72, or 18.3 percent, to $69.35, while Lilly climbed $2.91 to $58.07.
The Russell 2000 index of smaller companies was down 11.16, or 1.9 percent, at 580.78.
Thursday's losses in U.S. markets had a ripple effect overseas, as the Nikkei stock average fell 1.66 percent. In Europe, Britain's FTSE 100 closed down 1.09 percent, France's CAC-40 lost 1.92 percent for the session, and Germany's DAX index tumbled 2.04 percent.
Reuters and the Associated Press contributed to this report.