Stocks Sink on Dubai Debt Worries

U.S. indexes fell 1.5% or more Friday on news that the emirate's main investment vehicle is seeking to suspend repayments on $59 billion

U.S. stock indexes and major commodity futures closed lower Friday as Wall Street scrambled to catch up with steep sell-offs that occurred overseas during the Thanksgiving holiday while U.S. exchanges were closed.

Reports that Dubai World, the emirate's investment vehicle, was seeking to suspend repayments on all or part of its $59 billion in debt sent stocks in Europe down more than 3% on Thursday; Asian markets made similar drops Friday. The news sent investors into Treasuries, cash and other less-risky investments, though stocks in the U.S. were well off their worst levels.

In the U.S., investors were also paying close attention to retail sales as the holiday shopping season kicks off with "Black Friday".

"Based on our visits and store associate comments - we believe sales are meeting or exceeding plan for Black Friday (important as gauge of discretionary demand)," wrote analysts from Stifel Financial in a note Friday.

On Friday, the 30-stock Dow Jones industrial average finsihed lower by 154.48 points, or 1.48%, at 10,309.92. The broad Standard & Poor's 500-stock index was down 19.14 points, or 1.72%, at 1,091.49. The tech-heavy Nasdaq composite index lost 37.61 points, or 1.73%, to 2,138.44.

U.S. equity markets closed at 1:00 p.m. ET Friday.

European stocks regained equilibrium after earlier losses. The FTSE 100 index of leading British shares was up 51.60 points, or 0.99%, at 5,245.73, while Germany's DAX added 71.44 points, or 1.27%, to 5,693.28. The CAC-40 in France was 42.22 points, or 1.15%, higher at 3,721.45. On Thursday, Europe's main indexes slid over 3%, with banks, especially those thought to have exposure to Dubai such as Barclays PLC, HSBC PLC and Standard Chartered PLC, particularly badly hit.

Asian stocks were hammered as they played catch-up following the big losses in Europe in the previous session. Hong Kong's Hang Seng closed 1,075.91 points, or 4.8%, lower at 21,134.50, while South Korea's benchmark plummeted 4.7% to 1,524.50. Elsewhere in Asia, Japan's Nikkei 225 stock average fell 301.72 points, or 3.2%, to 9,081.52 while Australia's index dropped 2.9%. China's main Shanghai stock measure was off 2.4%.

Treasuries were holding large gains Friday as investors panicked over news of Dubai World's debt rescheduling effort, resulting in a huge flight to safety trade Thursday while U.S. markets were shuttered. On Friday, the 10-year note was higher in price at 101-09/32 for a yield of 3.229%, while the 30-year bond was higher at 102-26/32 for a yield of 4.212%.

The U.S. dollar index was higher at 75.02. Earlier, the dollar slid to a new 14-year low of 84.81 yen amid mounting expectations that the Bank of Japan may intervene in the markets by buying dollars or selling yen after Japan's finance minister Hirohisa Fujii said he was "extremely nervous" about the movements in the yen and that the "market had moved too far in one direction."

In times of uncertainty, the dollar is considered to be more of a safe haven currency. Investors are also concerned about the exposure of European banks to Dubai.

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