Dow tumbles 200, ending tough week

NEW YORK (CNNMoney.com) -- The Dow industrials plunged more than 200 points Friday on credit markets worries and a surge in oil prices, finishing an especially tough week for Wall Street.

The Dow Jones industrial average (down 208.10 to 13,265.47, Charts) plunged 208 points, or 1.5 percent, its fifth biggest point drop so far this year.

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This week's sharp sell-off, which left the 30-stock index down 585 points or 4.29 percent for the week, comes just days after the blue chip barometer finished above 14,000 for the first time ever.

The broader S&P 500 (down 23.71 to 1,458.95, Charts) lost 1.6 percent while the tech-fueled Nasdaq composite index (down 37.10 to 2,562.24, Charts) slipped 1.4 percent.

Credit market fears, which helped roil markets just a day earlier, again wreaked havoc on investors nerves Friday.

"There's been no fundamental problem, other than people are worried about the corporate bond market," said Tony Dwyer, equity market strategist at FTN Midwest Research. "This is one of those cases where fear is worse than reality."

Fanning those fears was an announcement by Cadbury Schweppes (up $0.30 to $48.74, Charts) that it decided to delay the sale of its North American beverage unit, which produces Dr. Pepper and Snapple, citing recent turmoil in the debt market.

Investors around the world have been rattled by signs of tougher conditions in credit markets, since tighter credit could raise the cost of borrowing for companies, hurting corporate earnings. This is likely to slow the buyout boom, which has helped prop up stock prices.

Shares of the private equity firm Blackstone Group (down $1.34 to $24.36, Charts), which went public late last month, fell more than 5 percent in Friday trade on the New York Stock Exchange on those fears.

The Dow sell-off, which has cut the index's gain to about 8 percent for the year, paused briefly after Treasury Secretary Paulson said in a televised interview that the U.S. economy is the strongest he has seen in several decades, helped by growth outside the U.S.

His comments came after the Commerce Department reported the economy grew at a faster-than-expected pace of 3.4 percent in the second quarter, while a key inflation reading came in tamer than expected.

In other economic news, the University of Michigan reported an uptick in consumer sentiment in July in its monthly survey, although the reading fell short of estimates.

On the earnings front, Chevron (down $2.25 to $85.20, Charts, Fortune 500) reported improved quarterly earnings, while leading biotech Amgen (down $0.54 to $55.62, Charts, Fortune 500) reported a better-than-expected gain in earnings after the closing bell Thursday.

Gap Inc. (up $0.88 to $17.79, Charts, Fortune 500) was one of the few advancers Friday, with its shares climbing 5 percent on news that the apparel maker named Glenn Murphy as the company's new CEO.

Shares of the spinal-products maker Kyphon Inc. (up $12.92 to $66.60, Charts) soared 24 percent higher after fellow devicemaker Medtronic (down $0.11 to $50.81, Charts, Fortune 500) said it agreed to buy the company for $3.9 billion.

Market breadth was negative as losers beat winners by more than 2 to 1 on the New York Stock Exchange on volume of 2.27 billion shares. Decliners topped advancers on the Nasdaq by the same ratio on volume of 2.74 billion shares.

Treasury bonds kept climbing after a big run-up in the previous session, as investors again sought shelter from falling stock prices, with the 10-year note yield at 4.76 percent, down from 4.78 in the previous session. Bond prices and yields move in opposite directions.

The dollar gained versus the euro and was lower against the yen.

COMEX gold for December fell $2.80 to $672.30 an ounce.