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Dow tumbles 280 points as credit fears intensify

Credit market concerns and negative Bear Stearns news sparks last-minute selloff sending the Dow, Nasdaq and S&P 500 more than 2% lower.

By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Wall Street ended another rollercoaster week with the Dow industrials plummeting 280 points in the last moments of trade Friday amid credit market fears, sparked by Wall Street bank Bear Stearns.

The Dow Jones industrial average (down 244.44 to 13,218.89, Charts) fell 283 points, or 2.1 percent, based on early tallies, after the 30-stock index moved towards the breakeven point earlier in the session.

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The broader S&P 500 (down 39.31 to 1,432.89, Charts) lost 2.7 percent, while the tech-fueled Nasdaq Composite index (down 64.73 to 2,511.25, Charts) tumbled 2.5 percent.

Treasury prices soared as investors sought shelter in the safe haven investments, lowering the yield on the 10-year note to 4.69 percent from the 4.77 percent level reached late Thursday. Bond prices and yields move in opposite directions.

"A lot of this stuff is being attributed to Bear Stearns conference call going on right now," said Ryan Larson, senior equity trader at Voyager Asset Management.

"There's nothing reassuring the market about subprime and that continues to underline the tone in market - any whisper or negative news we get a selloff."

News that credit rating agency Standard & Poor's lowered Bear Stearns debt rating to "negative" from "stable" in the wake of its recent hedge fund woes sent an already jittery market lower Friday.

Bear Stearns (down $6.82 to $108.99, Charts, Fortune 500) shares were lower for most of the session and fell 6 percent in afternoon trade after the company's chief financial officer warned in a conference call with Wall Street analysts that the recent turmoil in the bond market is as bad as it has been in 22 years.

Other financials such as Goldman Sachs (down $6.46 to $181.00, Charts, Fortune 500) and Morgan Stanley (down $3.07 to $60.81, Charts, Fortune 500) were also lower, while the KBW Bank Index (down $4.10 to $102.06, Charts) fell nearly 3 percent and the AMEX Securities Broker/Dealer index (down $10.30 to $214.40, Charts) slipped nearly 3.6 percent.

Worries about the mortgage sector, particularly subprime, and tighter conditions in the credit market have spooked investors lately, with the Dow industrials suffering its worst week in over 4 years last week.

Wall Street found little solace in Friday's monthly employment report, which revealed that U.S. employers added fewer jobs than anticipated in July. The Institute for Supply Management's service sector reading for the month also came in weaker-than-expected.

In corporate news, DaimlerChrysler (down $2.14 to $89.04, Charts) completed the sale of its Chrysler Group unit to private equity firm Cerberus Capital Management, bringing an end to the failed 9-year-old merger.

American Home Mortgage closed its doors Friday, cutting nearly 7,000 jobs, after lenders had cut off credit to the mortgage lender.

Take-Two Interactive Software (down $2.75 to $14.16, Charts) warned after the bell Thursday that it would delay its most important upcoming video game, "Grand Theft Auto IV," and that it would post a full-year loss. Shares plunged nearly 18 percent lower on the Nasdaq.

On the earnings front, both consumer-products maker Procter & Gamble (down $0.26 to $63.04, Charts, Fortune 500) and the No. 1 automaker, Toyota Motor (up $0.68 to $119.27, Charts), reported better than expected profits Friday.

Market breadth was negative. Decliners topped advancers by more than 3 to 1 on the New York Stock Exchange on volume of 2.05 billion shares. Losers beat winners by the same ratio on the Nasdaq on volume of 2.53 billion shares.

Oil prices retreated as the price of U.S. light crude lost $1.75 to $75.11 a barrel on the New York Mercantile Exchange.

The dollar fell against the euro and the yen. COMEX gold for December gained $7.80 to $684.40 an ounce. Top of page