Down day, down week
Wall Street tumbles, with the Dow closing at a 3-month low, as crude prices jump and the financial and auto sectors struggle.
NEW YORK (CNNMoney.com) -- Stocks slumped Friday, ending a tough week on a low note as renewed worries about the credit market crisis and inflation sent the Dow to a three-month low.
Bonds rallied, sending the corresponding yields lower as investors sought the comparative safety of government debt. The dollar slipped versus other major currencies.
The Dow Jones industrial average (INDU) lost around 220 points, or 1.8%, closing at its lowest point since March 10. The broader Standard & Poor's 500 (SPX) index lost 1.9% and closed at its lowest point in nearly three months. The tech-heavy Nasdaq composite (COMP) lost 2.3%.
For the week, the Dow fell 3.8%, the S&P 500 fell 3.1%, and the Nasdaq fell just under 2%.
Stocks have been under pressure most of the week amid spiking oil prices and, especially, revived financial market worries. Although the credit crisis is more than a year old, poor results from a number of big names this week have reminded Wall Street that it's far from over.
Both Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500) reported big drops in quarterly profit this week, although Goldman managed to top estimates. Citigroup warned it would see substantial debt-related writedowns in the second quarter, and rumors circled on Friday that Merrill Lynch could issue a similar warning.
Meanwhile, Merrill Lynch reportedly downgraded a number of regional banks Friday, while ratings service Moody's cut its outlook on a pair of bond insurers.
"There's a continuing erosion of the financial sector and I don't see it getting any better anytime soon," said Len Blum, managing director at Westwood Capital.
He said that the sluggish economy was making it hard to get a feel for what the profits might be at the big banks going forward. In addition, the fact that several banks this week have announced that they're going to raise capital by selling more stock is a negative in that it dilutes share value.
"You've got financial worries, with the sector continuing to act like dreck," said Tom Schrader, managing director at Stifel Nicolaus. "And that's coupled with the fact that oil has reversed itself."
Westwood's Blum said that the quarterly options expiration was also having an impact, but on a more subtle level that other factors in the market Friday.
Financials under fire: Ratings agency Moody's cut its credit ratings on MBIA (MBI) and Ambac Financial (ABK) on worries about the company's financial strength.
Moody's had already warned about such a move, and it followed similar actions by Standard & Poor's and Fitch Ratings. Nonetheless, the downgrades added to ongoing worries about the financial sector.
The downgrades also contributed to a Merrill Lynch downgrade of a number of regional banks, according to published reports. Meanwhile, large financial firms, including Morgan Stanley, Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500), all tumbled.
But declines were widespread, with Coca-Cola (KO, Fortune 500) the only gainer among the Dow 30. Besides the Dow's financial components, the other big losers were Alcoa (AA, Fortune 500), Home Depot (HD, Fortune 500), Verizon Communications (VZ, Fortune 500) and General Motors (GM, Fortune 500).
GM plunged almost 6.8% after S&P said it may cut its debt rating on the company and on its finance affiliate unit.
S&P also said it may cut debt ratings and finance unit ratings on Ford Motor (F, Fortune 500) and Chrysler. Moody's cut Ford's outlook to "negative" from "stable." Earlier, Ford said it is delaying the launch of its redesigned pickup truck and warned that its 2008 loss will be bigger than its 2007 loss.
Falling oil prices propelled technology and transportation stocks Thursday, and those sectors were also among the big losers Friday.
Microsoft (MSFT, Fortune 500), Apple (AAPL, Fortune 500), Google (GOOG, Fortune 500), Dell (DELL, Fortune 500), Oracle (ORCL, Fortune 500) and eBay (EBAY, Fortune 500) were among the big tech sliders.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by over 4 to 1 on volume of 2.04 billion shares. On the Nasdaq, decliners beat advancers by 5 to 2 on volume of 2.69 billion.
Volume was heavy because of the quadruple options expiration, a quarterly event in which stock futures and options and stock index futures and options all expire simultaneously. This process can add volatility to the underlying stocks.
Oil prices rise: U.S. light crude oil for July delivery rose $2.69 to settle at $134.62 a barrel on the New York Mercantile Exchange. Prices rose on reports that Israel may be conducting test runs for an attack on Iran, as well as further thoughts on China's announcement Thursday that it's boosting fuel subsidies.
Prices fell $5 Thursday after China said it will lift fuel subsidies, a move initially seen as likely to curb demand in the country and lower prices globally. But investors took a different perspective on Friday, ahead of an oil summit in Saudi Arabia this weekend. (Full story).
Other markets: The national average price for a gallon of regular unleaded gas rose to $4.075 from $4.073 the previous day, according to AAA. (Full story).
COMEX gold for August delivery fell 50 cents to settle at $903.70 an ounce.
In currency trading, the dollar slumped versus the euro and the yen.
In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 4.17% from 4.21% late Wednesday. Bond prices and yields move in opposite directions. 
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