Stocks fell from 29-month highs on Friday as investors worried about escalating anti-government protests in Egypt and as Amazon and Ford shares tumbled after results.

Nasdaq quotations for its main stock indexes suffered an outage of nearly one hour at the open, causing confusion among traders. Nasdaq OMX Group has not explained what caused the problem.

Investors shunned risk and a volatility index spiked after dozens of people were wounded as Egyptian armed forces deployed in Cairo and other major cities to tackle huge popular protests demanding the resignation of President Hosni Mubarak.

It is too soon to say what the outcome of this is going to be, said Joe Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania. A breakdown in internal control in Egypt will be debilitating for North Africa, will have negative impact on energy prices, and that could be a challenge to the economy in 2011.

Crude futures jumped about 4 percent to nearly $89 per barrel.

The Dow Jones industrial average <.DJI> dropped 136.23 points, or 1.14 percent, to 11,853.60. The Standard & Poor's 500 Index <.SPX> fell 17.65 points, or 1.36 percent, to 1,281.89. The Nasdaq Composite Index <.IXIC> lost 59.10 points, or 2.14 percent, to 2,696.18.

The Dow's decline threatened to end a streak of eight weeks of gains in the blue-chip index. The S&P 500 was on track to close below its 14-day moving average for the first time in two months.

Ford Motor Co slumped 11.8 percent to $16.57 after a steep drop in quarterly profit due to a charge for debt payments. Rival automaker General Motors Co lost 5.2 percent to $36.64.

Dow component Microsoft Corp fell 4.5 percent to $27.57 a day after its profit dipped. Inc dropped 8.4 percent to $168.93 after the online retailer recorded revenue below the consensus view.

What we're seeing on the earnings front is investors having a great deal of anticipation, hoping to drive prices to records, and now we're selling on the news of those earnings, Battipaglia said.

In another sign of uncertainty, the CBOE volatility index <.VIX> rose 19 percent to 19.21 in its largest daily percentage gain since June.

During the Nasdaq outage, traders said there were no quotes for the Nasdaq composite <.IXIC> and the Nasdaq 100 <.NDX> indexes. Individual share price quotes were not affected, and trading volume was normal.

Equities garnered support earlier in the session from data showing the U.S. economy grew at a 3.2 percent rate in the fourth quarter as consumer spending accelerated. Excluding inventories sales grew about 7.1 percent, the best since 1984.

(Reporting by Rodrigo Campos; editing by Jeffrey Benkoe)