Market Snapshot October 30, 2009, 4:30PM EST

A Fearful Friday for Stocks

Major indexes tumbled by 2.5% or more on the day before Halloween amid worries about consumer spending and a spike in the dollar

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U.S. stocks closed sharply and broadly lower Friday, led by financial issues, as disappointing reports on personal spending and consumer confidence stoked investors' concerns about the economy. Treasuries jumped as stocks skidded.

On Friday, the 30-stock Dow Jones industrial average dropped 249.85 points, or 2.51%, at 9,712.73. All 30 stocks in the Dow industrials fell.

The broad Standard & Poor's 500-stock index was down 29.92 points, or 2.81%, at 1,036.19.

The tech-heavy Nasdaq composite index lost 52.44 points, or 2.50%, to 2,045.11.

On the New York Stock Exchange, 27 stocks were lower in price for every four that advanced. Breadth on the Nasdaq was 22-5 negative.

Fittingly, the day before Halloween saw market players flee in terror from a number of specters.

In addition to the disappointing data, stocks were hurt by a spike in the U.S. dollar index that pushed commodities-related futures and stocks lower.

A report that Citigroup (C) may announce a $10 billion write-down in the fourth-quarter related to deferred tax assets raised fresh concerns about the profitability of the financial sector. Meanwhile, CIT Group (CIT) plunged 24% after Carl Icahn agreed to support its prepackaged bankruptcy plan.

Another appropriate touch as the spookiest day of the year drew near: The Street's traditional fear gauge, the VIX volatility index, spiked above 30 for the first time since July.

Profit taking was the order of the day, with the market giving back all the gains won in Thursday's broad-based rally after futures-related sell programs kicked in as major indexes broke key support levels.

"[W]hile the sell-off a day after the strong GDP report caught many of us off guard - myself included as I was looking for at least a few more days of gains - it doesn't represent anything new under the sun," says S&P technical analyst Chris Burba. "It has become clear after the fact ... that the economic recovery in the third quarter had been fully discounted by [stock investors] as of Oct. 21."

So where does the market go from here? "I expect to see some wide swings in the indexes in the weeks or months ahead, during which time some lower lows [for equity indexes] are established," says Burba. "In terms of what influences crowd psychology, we'll probably start seeing more headlines and hearing more scuttlebutt about economic growth slowing as consumer spending retrenches after stimulus measures have run their course."

Traders looked ahead to news week's meeting of Federal Reserve policymakers for hints as to whether the Fed will tighten credit following Friday's positive Chicago PMI index and University of Michigan consumer sentiment data. But many experts see the economic trajectory lower heading into the fourth quarter.

Wall Street was also looking ahead to next week's other big event: the release of the October employment report on Friday, Nov. 6.

There was some volatility in Friday's session as investors adjusted their portfolios on October's last trading day, says S&P MarketScope.

European stocks tumbled Friday, with benchmark indexes off 2.21% in London, 2.86% in Paris, and 3.09% in Frankfurt.

Asian equities moved higher Friday. Tokyo stocks rose 1.45%, Hong Kong gained 2.29%, and Shanghai advanced 1.20%.

In U.S. earnings news Friday, MetLife (MET) posted third-quarter operating earnings per share (EPS) of 97 cents, vs. 84 cents operating EPS one year earlier, despite a slight decline in total revenue. According to newswire headlines from the company's conference call, MetLife said it may have to inject capital into its life insurance business; the company is tepid on 2010 investment prospects. MetLife also said lower invested capital and the potential for weak returns from some investments will probably hold down return on equity in 2010.

Novatel Wireless (NVTL) shares tumbled after the company warned of flat-to-lower sales.

Shares of McAfee (MFE) fell after the software security firm missed revenue estimates.

Duke Energy (DUK) gained 1.8% after third-quarter net profits fell 49% following a $400 million write-off, though that beat estimates.

Chevron (CVX) shares gained modestly after reporting a 51% drop in net income to $3.83 billion.