Stocks mauled by Bear, credit worries

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

The Dow Jones industrial average (down 281.42 to 13,181.91, Charts) fell 281 points, or 2.1 percent, based on early tallies, which is the third-biggest point drop for the 30-stock index this year.

The broader S&P 500 (down 39.14 to 1,433.06, Charts) lost about 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," Ryan Larson, senior equity trader at Voyager Asset Management, remarked just before selloff gained momentum.

"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."

Stocks were modestly lower for most of the session until about 2 p.m. when investment bank Bear Stearns hosted a conference call to discuss the company's health.

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.

Earlier in the session, credit rating agency Standard & Poor's lowered Bear Stearns' debt rating to "negative" from "stable" in the wake of its recent hedge fund woes, some of which were invested in bonds linked to subprime mortgages.

Those credit worries hurt shares of financial sector players such as Goldman Sachs (down $7.78 to $179.68, Charts, Fortune 500), Morgan Stanley (down $3.26 to $60.62, Charts, Fortune 500) and Lehman Brothers (down $4.67 to $55.78, Charts, Fortune 500) before spreading to the larger market.

Among individual issues, all 30 Dow components finished the session lower.

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.

Credit market fears helped send global stock markets tumbling last week, with the 30-stock Dow industrials falling 585 points, posting its biggest percentage drop since March 2003.

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 $2.06 to $89.12, 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 16 percent on the Nasdaq.

On the earnings front, both consumer-products maker Procter & Gamble (down $0.42 to $62.88, Charts, Fortune 500) and the No. 1 automaker, Toyota Motor (up $0.31 to $118.90, Charts), reported better than expected profits Friday.

Market breadth was negative. Decliners topped advancers by more than 5 to 1 on the New York Stock Exchange on volume of 2.05 billion shares. Losers beat winners on the Nasdaq by nearly the same ratio 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.