U.S. stocks tumbled on Friday after the top German official at the European Central Bank resigned in protest of the bank's bond-buying program, which has been a major tool in fighting the region's debt crisis.
ECB Executive Board member Juergen Stark will step down from his post by the end of the year, the bank said on Friday. Two sources told Reuters Stark's resignation, which comes almost three years before his term is due to expire, was because of a conflict over the central bank's controversial program of buying up sovereign bonds to help hold down borrowing costs in some debt-strapped euro zone members.
The ECB is critical in dealing with and potentially solving the sovereign debt issue, so when you get a new story like this, that there's internal turmoil in the ECB, that immediately has implications for the bond-buying program, which immediately has implications on the capital level in European banks, said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
Terrorism threats against New York City and Washington just ahead of the 10th anniversary of the September 11 attacks also prompted investors to sell equities ahead of the weekend.
Later in the day, we'll be dealing with concerns nobody wants to be long over the weekend because of these unconfirmed terrorism reports, de Gan said.
The Dow Jones industrial average <.DJI> was down 280.90 points, or 2.49 percent, at 11,014.91. The Standard & Poor's 500 Index <.SPX> was down 27.22 points, or 2.30 percent, at 1,158.68. The Nasdaq Composite Index <.IXIC> was down 49.98 points, or 1.98 percent, at 2,479.16.
The S&P 500 was on track to end the week more than 1 percent lower.
At a meeting of Group of Seven finance chiefs being held in France, U.S. Treasury Secretary Timothy Geithner on Friday pressed Europe's strongest economies to give unequivocal financial support to weaker euro zone states to overcome a debt crisis that threatens the world economy.
Investors remained skeptical about how much of President Barack Obama's $447 billion proposal to generate U.S. jobs would make it through Congress. Obama on Thursday night challenged Congress to enact tax cuts and new spending to revive a stalled job market, but he faces an uphill fight to win over Republicans.
In company news, Bank of America Corp officials have discussed slashing roughly 40,000 jobs during the first wave of a restructuring, The Wall Street Journal said, citing people familiar with the plans. The cuts aim to reduce the bank's workforce of 280,000 over a period of years, the Journal wrote.
Shares of Bank of America, a Dow component which earlier in the week announced a far-reaching reorganization of senior management, slid 2.1 percent to $7.05.
A number of brokerages, including Jefferies, cut price targets on Texas Instruments Inc after the company warned its third-quarter earnings and revenue would be worse than already low expectations. The stock was up 1.2 percent to $26.10 after trading as low as $25.52 earlier.
McDonald's Corp fell 5.3 percent to $83.89 after its August restaurant sales rose less than analysts expected.
(Additional reporting by Rodrigo Campos; Editing by Leslie Adler)