New York : The stock market's wild ride may not be over yet. The Dow Jones industrials whipsawed again on Friday, a day after their largest one-day plunge.
The average was down as much as 279 points in the morning, went briefly into the black around lunchtime, then ended with a loss of 139.
Not quite as terrifying as the brief 1,000-point plunge the day before, but still extraordinarily volatile. It's normal for markets to trade erratically a day after such a disruptive move, but analysts are divided over whether stocks are in the process of finding a bottom or whether too many investors are too spooked to get back in.
"It's a pile of uncertainty ... We don't have any more clarity than we did yesterday," Art Hogan, chief market analyst at Jefferies & Co. in Boston, said. "We're going to have investors who are less inclined to be in this marketplace until we get some clarity."
Traders were still anxious amid lingering questions about what caused Thursday's sudden drop. Several possibilities were being investigated but as of late Friday no clear explanation had emerged.
Trigger for drop
Investors looked past a surprisingly strong report on the US jobs market and focused instead on the latest moves in Europe's spreading debt crisis. Their concerns have fed a wave of turbulence over the past two weeks, including four straight days of selling last week, and helped trigger Thursday's drop.
Technology stocks were particularly hard hit following reports that Nokia was broadening its legal fight against rival cell phone maker Apple to include the iPad, Apple's new hit product. Apple shares fell 4.2 per cent in heavy trading.
The concerns about Europe's debt crisis go far beyond Greece. A further loss of confidence in European government debt could have an impact on other weak countries like Portugal, potentially requiring another difficult bailout process.
Germany's parliament approved Berlin's share of the rescue package after a boisterous debate, but investors still fear that Greece may not make a May 19 deadline to make a debt repayment.
That could cause ripple effects throughout the global financial system and further undermine Europe's shared currency, the euro.
"You're not concerned about the kid with the cold, but how he spreads it to the rest of the class," Len Blum, a managing partner at investment bank Westwood Capital, said.
Blum noted that Greece's debt problem could be similar to the subprime mortgage meltdown in the US, which quickly spread to other parts of the financial system.
The Dow closed down 139.89, or 1.3 per cent, at 10,380.43. The Standard & Poor's 500 index fell 17.27, or 1.5 per cent, at 1,110.88, while the Nasdaq composite fell 54, or 2.3 per cent, to 2,265.64.
Outpacing gainers
Falling stocks outpaced gainers two-to-one on the New York Stock Exchange, where consolidated volume was very heavy at 9.5 billion shares, compared with 10.4 billion on Thursday.
Friday's trading left the Dow down 5.7 per cent for the week and erased its gains for the year. The S&P fell about 6.4 per cent, while the Nasdaq was off 7.9 per cent for the week.
The S&P and Nasdaq also went into the red for 2010.
The Russell 2000 index of smaller companies was off 8.9 per cent for the week, and the Dow Jones US Total Stock Market Index fell 834.93, or 6.8 per cent, to 11,444.25.
The week's losses would put the market about well toward what analysts call a correction, usually defined as a drop of between 10 per cent and 20 per cent following a sustained rise.
The Dow is now 7.4 per cent off its recent high of 11,205.03 reached on April 26. The S&P 500 is down 8.7 per cent from its recent high of 1,217.28 reached April 23.
"We were in the midst of a pullback, we needed one, we got one," Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners said. Cardillo said the choppy trading after such a drastic decline likely signals the market trying to find a bottom.
Stocks have been on a nearly uninterrupted upward path since March of last year, when indexes hit 12-year lows.
Analysts have been predicting a correction for months, only to see the market bounce back after brief periods of decline.
Long-term market watchers actually welcome occasional pullbacks in stocks, saying that gives investors opportunities to pick up shares at bargain prices.
"We had the earthquake, we're now in the midst of getting the aftershocks," Steven Goldman, chief market strategist for Weeden & Co. in Greenwich, Conn., said.