Stocks closed sharply lower as a series of depressing economic and earnings reports have raised concerns about the health of economy.
Investors are worried that disappointing quarterly results from American International Group aig and Dell dell signal more trouble ahead for the economy. A weak reading Friday on regional business activity has also stirred worries on Wall Street.
The Dow Jones industrial average fell 315.79, or 2.5%, to 12,266.39. The decline more than erased the week's 200 point gain.Broader stock indicators also tumbled. The Standard & Poor's 500 index lost 37.05, or 2.7%, to 1330.63, and the Nasdaq composite index declined 60.09, or 2.6%, to 2271.48.
A government report that personal spending, on an inflation-adjusted basis, was unchanged in January provided further evidence of a consumer pullback that's likely to weaken the economy further.
There also was nervousness about what impact the recent slide in the dollar and robust rally in commodities — including a jump in crude oil prices to $103 a barrel— will have on the economy and companies.
Over all, stocks have performed better in February than in January, when credit market turmoil took a heavy toll on the major averages. But disappointing earnings results released late Thursday cast a pall over the market and caused stocks to end the month on a wary note.
Insurer AIG announced a $5.29 billion quarterly loss and took a massive charge to account for its exposure to credit derivatives. The loss caught analysts off guard, as many had expected the company to report a profit.
Computer maker Dell had a 6% decline in quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending.
Wall Street's pullback comes a day after stocks sank as investors fretted over a rise in unemployment claims and the prospect of more bank failures. Federal Reserve Chairman Ben Bernanke warned that while large U.S. banks will likely recover from the recent credit crisis, other banks are at risk of failing.
Some relief for the ailing bond insurance industry is on the way. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Assured Guaranty.
Assured does not have as much exposure to bad subprime debt as some of its rivals, but the deal still shows investors are willing to pump capital into an industry where troubles have hurt many classes of normally stable debt.
In economic news, the Reuters-University of Michigan final consumer sentiment reading for February came in at 70.8, better than the figure of 69 that had been expected.
The Chicago purchasing managers index for this month came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report indicated the factory sector is shrinking in that region. The figure is seen as a precursor of the national Institute for Supply Management report due out Monday.
There was muted reaction to news from the Commerce Department that consumer spending, after adjusting for inflation, was flat for the second straight month in January. The report could support the argument that the economy is at risk of recession.
Consumer spending posted a 0.4% monthly rise, which was more than economists had been expecting. However, all of that gain came from a surge in inflation during the month. Incomes in January posted a 0.3% increase, a bit stronger than expected, but down from a 0.5% gain in December.
A closely watched gauge of consumer inflation posted a 0.4% increase in January and was up 3.7% over the past 12 months, the biggest year-over-year gain since 2005. This result will intensify worries that inflation is accelerating even as the economy slows.
Overseas, Japan's Nikkei stock average closed down 2.3%. In afternoon trading, Britain's FTSE 100 fell 0.6%, Germany's DAX index fell 1.7%, and France's CAC-40 fell 1.4%.