"Since mid-July I think it's become apparent that the global economies have really weakened pretty sharply," said Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York. He said that while investors had been applauding the drop in oil prices since then, there was an assumption that lower commodities prices would hasten a recovery in the U.S. economy. Now, he said, investors are worried that the economy might be weakening even as oil falls.

"It's disinflation coupled with an accelerating downside in the economy. That's not what people were prepared for. I think people were expecting disinflation as an economic recovery was under way," Lee said. "The surge in unemployment today really underscores that fear."

Wall Street again found little comfort from falling oil. Crude at one point dropped below $106 a barrel Friday as the dollar continued to gain on the euro and investors waited to see whether OPEC moves to restrict output next week following a two-month plunge in prices. The Organization of the Petroleum Exporting Countries is scheduled to meet early next week in Vienna and has indicated it may take action to defend the $100-a-barrel level.

Light, sweet crude settled down $1.66 to $106.23 a barrel on the New York Mercantile Exchange.

Among financials carving out advances, Citigroup Inc. rose 77 cents, or 4.2 percent, to $19.07, while Bank of America Corp. rose $1.63, or 5.3 percent, to $32.23. Wachovia Corp. rose $1.22, or 7.9 percent, to $16.75.

Lehman Brothers Holdings Inc. rose $1.03, or 6.8 percent, to $16.20 after a Sandler O'Neill & Co. analyst said he expects the troubled investment bank to survive the credit crisis. The stock has fluctuated on reports that it is hammering out a deal for a cash infusion or buyout.

In the consumer staples sector, smokeless tobacco maker UST Inc. surged following a report from The New York Times that Altria Group Inc. plans to acquire the company. Altria, parent of Marlboro maker Philip Morris USA, dismissed the report as "pure speculation." Nonetheless, UST, the maker of Skoal and Copenhagen brands, jumped $13.55, or 25 percent, to $67.55, while Altria rose 29 cents to $20.95.

Energy names slipped as oil continued its drop. Chevron Corp. declined $1 to $80.22, while ConocoPhillips fell $1.05 to $75.43.

Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.3 billion shares traded Thursday.

The Russell 2000 index of smaller companies rose 0.23, or 0.03 percent, to 718.85.

And the gloom about the U.S. economy was not contained to just major American indexes. Investors overseas sent shares sharply lower on concerns about America's effect on global growth.

Japan's Nikkei stock fell 2.75 percent. In Europe, Britain's FTSE 100 ended down 2.26 percent, Germany's DAX index dropped 2.42 percent, and France's CAC-40 shed 2.49 percent.