Brutal selloff on Wall Street

Dow down almost 367 points, its third worst day of the year, on fears about credit and housing sector, earnings, record-high oil prices, slide in dollar, what the Fed will do next.

Stocks tumbled Friday as record-high oil prices, more problems in the bank sector and slower corporate earnings growth revived worries about an economic slowdown.

The Dow Jones industrial average lost around 367 points, seeing its third-biggest point loss of the year, its worst since the steep selloff in early August in the midst of the credit and mortgage market mess.

The decline Friday left the blue-chip indicator at its lowest point since Sept. 17, the day before the Federal Reserve cut interest rates for the first time in 4 years, triggering a rally that was cut short this week.

The S&P 500 index lost 2.6 percent and the Nasdaq composite gave up 2.7 percent.

Disappointing earnings from Caterpillar, Honeywell and others exacerbated concerns about weak third-quarter profits. Meanwhile, Wachovia became the latest financial services firm to reveal how the credit and mortgage market crisis had hit its profits.

Oil prices ended lower Friday, but not before hitting an all-time high of $90.07 a barrel in electronic trading. The dollar fell to a new record low against the euro and also slipped versus the yen. Treasury prices surged, as investors sought safety in the comparably safe haven of bonds.

The declines reflect a certain shifting in perspective, said Ram Kolluri, president at Global Investment Management.

"We have fully come to the queasy realization that the U.S. economy may slow down considerably," Kolluri said.

He said that this realization has been driven by the ongoing problems in the real estate market, rise in gold and other commodity prices, and especially $90 a barrel oil - all of which is hitting Corporate America, and the consumer.

Consumer spending fuels roughly two-thirds of economic growth, and after a lot of predictions, actually does seem to be slowing substantially.

Stocks have had a tough week as investors digested a batch of lackluster earnings reports and tried to put into context what the run up in oil prices could mean for consumer spending and the economy.

"We're seeing this kind of selloff because of where oil is and because the banks are reminding people that we have a lot further to go before we get to the bottom of the real estate issue," said John Forelli, portfolio manager at Independence Investments.

Forelli said that this marks a change in thinking from earlier in the month, when a rash of billion-dollar writedowns from big banks seemed to give investors a "the worst is behind us" perception.

The run up in oil prices was also significant in that it revives fears about whether it will drive up inflationary pressures enough to limit the Federal Reserve's ability to cut interest rates further, even if the economic growth deteriorates enough to warrant more cuts.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 5 to 1 on volume of 1.79 billion shares. On the Nasdaq, decliners topped advancers 5 to 1 on volume of 2.41 billion shares.

Stock declines were broad based, with all 30 Dow stocks slumping.

Source - CNNMoney