NEW YORK — Stocks tumbled Friday on escalating worries about the financial and automotive sectors and rebounding oil prices. The major indexes fell by more than 1 1/2 percent, and the Dow Jones industrial average gave up more than 200 points to end at its lowest levels 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 investors a psychological blow.

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

And among financials, Merrill Lynch — which slashed earnings estimates for regional banks Friday — was the target of market rumors that it may issue its own profit warning. A Merrill Lynch spokeswoman declined to comment. The stock fell $1.74, or 4.6 percent, to $35.95.

Merrill's comments about regional banks added to the market's 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 for the week. Early in the week, investment banks posted profit declines, Fifth Third Bancorp said it need 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.

"There has to be reticence about getting back in," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. "It's definitely an ugly end to the week."

According to preliminary calculations, the Dow slumped 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.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to a heavy 2.04 billion shares compared with 1.29 billion shares traded Thursday. Volume was heavy in part because of "quadruple witching" — the simultaneous expiration of four types of options contracts.

Bond prices jumped as stocks sank. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.14 percent from 4.21 percent late Thursday.

As the economy faces a tight lending climate, it also struggles with surging fuel costs. Crude oil futures jumped $2.69 to settle at $134.62 a barrel on the New York Mercantile Exchange, recovering some of Thursday's drop of nearly $5 per barrel on news of a fuel price hike in China.

Investors are awaiting this weekend's meeting in Saudi Arabia of oil producers and consumer nations, which could bring some relief to the problem of soaring oil prices. But many analysts believe the gathering might end up being a mere finger-pointing session.

Bond insurer MBIA Inc. shares fell 86 cents, or 13 percent, to $5.59, while competitor Ambac Financial Group Inc. edged up 2 cents to $2.05, after losing their "AAA" rating from Moody's.

Another ratings move hit stocks of automakers. Standard & Poor's Ratings Services placed the corporate credit ratings of General Motors Corp., Ford Motor Co. and Chrysler LLC on watch with negative implications. The classification means ratings have a one-in-two chance of being downgraded in the next three months.

S&P believes high fuel costs will hurt the U.S. auto market through 2009.

GM fell $1, or 6.7 percent, to $13.79, while Ford lost 51 cents, or 8.1 percent, to $5.81.

The dollar fell against most other major currencies, while gold prices fell.

The Russell 2000 index of smaller companies fell 12.10, or 1.64, to 725.73.

Overseas, Japan's Nikkei stock average dropped 1.33 percent. Britain's FTSE 100 fell 1.53 percent, Germany's DAX index declined 2.12 percent, and France's CAC-40 fell 1.79 percent.