Stocks tumbled on Friday on worries that heavy euro-zone debt loads could stymie a global recovery, while Visa and MasterCard led the financial sector lower after the Senate backed limits on card fees.
The initial optimism over moves to stem the euro-zone debt crisis ebbed on concerns the efforts won't be enough, and that plans to rein in national budgets could stifle growth.
Deutsche Bank's chief executive, who had helped to craft a private-sector bailout package for Greece, said he doubted Athens could repay its debt, adding that a new $1 trillion euro-zone rescue would help stabilize Italy and Spain.
Everyone was excited when the news of the package came out, but now that we've had time to analyze it, many people are thinking that it may not be enough, said Peter Lewis, fund manager at Murphy Capital Management in Gladstone, New Jersey.
The worst scenario is that these issues spread across Europe, which would put a lot of fear into our markets.
The euro fell to an 18-month low against the dollar and global shares dropped sharply while gold hit record highs.
Credit card and other financial companies slumped one day after the Senate voted to limit fees charged on credit and debit card transactions. The S&P Financial sector <.GSPF> shed 3 percent, while Visa Inc dropped nearly 10 percent to $77.52, and MasterCard sank 7.5 percent to $215.01.
Regulation is always a concern for the market, but this sell-off may be overdone since not all the details are clear yet, Lewis said.
The Dow Jones industrial average <.DJI> was down 172.77 points, or 1.60 percent, at 10,610.18. The Standard & Poor's 500 Index <.SPX> dropped 23.52 points, or 2.03 percent, at 1,133.92. The Nasdaq Composite Index <.IXIC> sank 57.57 points, or 2.40 percent, at 2,336.79.
Shares of Nvidia Corp weighed on the Nasdaq, sliding 13.5 percent to $12.66 a day after the graphics chipmaker forecast sales below estimates.
Also on the earnings front, both J.C. Penney Co Inc and Dillard's Inc reported quarterly results. Dillard's rallied 12 percent to $28.69 as profit topped estimates, while Penney dipped 2.4 percent to $27.50 on a weak outlook.
Energy companies fell, with the S&P Energy sector <.GSPE> off 2.6 percent as crude futures fell to a three-month low on swollen U.S. crude inventories and concerns about Europe.
A batch of positive economic data helped to pull stocks off lows. Retail sales and industrial production for April both rose, while business inventories climbed to an 8-month high in March, and consumer sentiment edged up in May as forecast.
(Editing by Jeffrey Benkoe.)