Dow below 12,000 as worries compound

NEW YORK — Stocks capped a difficult week with steep losses Friday, amid escalating worries about the financial and automotive sectors and a rebound in oil prices.

The major indexes fell by more than 1 1/2 percent on the day, and the Dow Jones industrial average gave up more than 220 points to end at its lowest level in three months.

While investors have seen other triple-digit days in the past year since concerns about the economy began emerging, the Dow's first finish under 12,000 since mid-March could deal Wall Street a psychological blow.

An afternoon downgrade of automakers helped draw out sellers in the stock market, while Treasury prices rose as investors sought the safety of government debt.

A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.

Troubling news about the financial sector piled up all week, sending stocks to steep losses. Early on, the investment banks posted profit declines, Fifth Third Bancorp said it needs to raise $2 billion in capital and two Bear Stearns hedge fund managers were charged with lying to investors — causing many investors to flee from stocks.

Quincy Krosby, chief investment strategist at The Hartford, said Friday's session saw a confluence of the worries that investors have been grappling with as they try to determine where the economy is headed.

"I liken it to the GPS system saying 'recalculating,"' she said, referring to the market's uncertainty. "There's no clarity, there's no confidence."

Krosby added: "The crosscurrents are coming at a time when the backdrop for the economy appears to be stabilizing. And yet the headline risk is unrelenting."

The headlines Friday helped send the Dow down 220.40, or 1.83 percent, to 11,842.69. The blue chips haven't closed below 12,000 since March 17, when the market was worried about Bear Stearns Cos. collapsing. Friday's pullback left Coca Cola Co. as the only advancer among the 30 stocks that comprise the Dow.

Broader stock indicators also dropped. The Standard & Poor's 500 index fell 24.90, or 1.85 percent, to 1,317.93, and the Nasdaq composite index fell 55.97, or 2.27 percent, to 2,406.09.