Stocks suffered their biggest one-day loss in nearly six months on Friday as anti-government rioting in Egypt prompted investors to flee to less risky assets to ride out the turmoil.
Increased instability in the Middle East drove the CBOE Volatility Index <.VIX>, the stock market's fear gauge, more than 23 percent higher as investors scrambled for protective positions.
The market hates uncertainties, especially geopolitical ones, and based on how that shapes up throughout the weekend (in Egypt), next week's trading will be impacted, said Thomas Nyheim, portfolio manager for Christiana Bank & Trust Co in Greenville, Delaware.
Trading volume was the highest of the year at 9.97 billion shares on the New York Stock Exchange, the American Stock Exchange and Nasdaq, compared to last year's estimated daily average of 8.47 billion shares.
The market drop ended the Dow's eight-week winning streak and pushed the S&P 500 below its 14-day moving average for the first time in two months. Disappointing results from Amazon.com
and Ford further added to the gloom.
Developments in the Middle East could be a trigger for investors to sell at a time when many expected a correction after a market rally of about 18 percent since September.
I think the next two to three weeks, the crisis in Egypt and potentially across the Middle East, might be an excuse for a big selloff of 5 to 10 percent, said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management in Cincinnati, Ohio.
Nasdaq quotations for its main stock indexes suffered an outage of nearly one hour at the open, causing confusion among traders. Nasdaq OMX Group blamed a glitch with its global index data service.
The Dow Jones industrial average <.DJI> ended down 166.13 points, or 1.39 percent, at 11,823.70. The Standard & Poor's 500 Index <.SPX> was down 23.20 points, or 1.79 percent, at 1,276.34. The Nasdaq Composite Index <.IXIC> fell 68.39 points, or 2.48 percent, at 2,686.89.
For the week, the Dow fell 0.4 percent, the S&P lost 0.5 percent and the Nasdaq dipped 0.1 percent.
Amazon.com shares slipped 7.2 percent to $171.14, a day after the online retailer recorded revenue below the consensus view.
Ford Motor Co slumped 13.4 percent to $16.27 after a steep drop in quarterly profit. Rival automaker General Motors Co also lost 5.4 percent to $36.60.
Dow component Microsoft Corp also fell 3.9 percent to $27.75 a day after its profit dipped.
In Egypt, President Hosni Mubarak sent troops and armored
cars into cities in an attempt to quell street fighting and mass protests, and medical sources said at least five protesters had been killed and 870 wounded.
The VIX's rise to 19.86 was the largest daily percentage gain since May. U.S. Treasuries prices and the dollar -- assets considered safe compared to stocks -- rallied.
U.S. crude futures rose 4.4 percent to $89.43 a barrel as the protests in Egypt threatened Middle East stability. Oil companies with operations in the region were hit, including Apache Corp and Occidental Petroleum Corp .
Apache shares were down 1.3 percent at $144.84 and Occidental Petroleum fell 3.3 percent to $93.81.
Equities garnered support from data showing the U.S. economy grew at a 3.2 percent rate in the fourth quarter as consumer spending accelerated.
(Additional reporting by Jennifer Ablan, Editing by Chizu Nomiyama)