U.S. stock dropped on Friday as a possible debt default at a Dubai state-owned conglomerate sparked fears of renewed financial turmoil.

All 30 Dow components and all 10 S&P sectors were in negative territory. Though the markets were down, they had eased from session lows.

The market is reacting to news of a significant credit risk, said David Katz, chief investment officer at Matrix Asset Advisors in New York. However, we've seen that once the dust settles, some of the markets that were hit the hardest rebound.

Katz added that the United States had less exposure to Dubai than other countries, and expects a deal to be worked out in Dubai.

The Dow Jones industrial average <.DJI> fell 161.96 points, or 1.54 percent, to 10,303.65. The Standard & Poor's 500 Index <.SPX> tumbled 19.26 points, or 1.76 percent, to 1,091.29. The Nasdaq Composite Index <.IXIC> dropped 38.03 points, or 1.75 percent, to 2,138.07.

On Wednesday, Dubai, with about $80 billion in total debt, said it would ask creditors of state-owned Dubai World and builder Nakheel, for a standstill agreement as a first step toward restructuring.

This is an attention-getter in an environment where investors have become more complacent, said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.

Dubai is deeply connected with the global community, and people are worried about a domino effect with other points of the financial system.

The U.S. dollar rose 0.4 percent against a basket of currencies <.DXY>, while January crude futures dropped 4 percent. Dow component Exxon Mobil Corp shares fell 1.9 percent to $75.02.

Black Friday marks the unofficial start to the holiday shopping period, and investors will be watching store cash registers for insight into consumer spending, which accounts for about 70 percent of the economy.

The S&P retail index <.RLX> fell 1.1 percent

(Editing by Jeffrey Benkoe)