Volatile Week Ends on a Sharp Downswing

News at a Glance

• Broad Losses: Major indexes finish down more than 3.2% each.
• OPEC Cuts: Oil supply to be trimmed by 1.5 million barrels.
• Banks Merge: PNC to buy National City in $5.6 bln deal.
• Global Selloff: Heavy selling slams Asia, Europe.

The Lowdown

Economic fear gripped the world tighter Friday, triggering a global selloff that slammed Wall Street. Again.

Stocks finished sharply lower as traders turned bearish on persistent concerns over the global economic crisis, the outlook for corporate earnings and the looming threat of higher oil prices. The Dow Jones Industrial Average lost 320 points to finish the day at 8379, its lowest point since the downturn began. The broader indexes were also hit hard. The Nasdaq dropped 52 to 1552, and the S&P 500 gave up 31 at 877.

Traders bailed after a week's worth of anemic corporate forecasts was compounded by OPEC's decision to cut the oil supply by 1.5 million barrels a day. The cut is effective Nov. 1.

OPEC said its cut is intended to keep prices stable even as demand buckles, citing "a dramatic collapse" in the energy market of "unprecedented in speed and magnitude." Oil prices have fallen sharply over the last several months in response to a projected decline in energy use tied to the recession.

On Friday, the supply move led to the opposite of its desired effect. Oil prices kept falling, as traders tried to handicap near-term demand. By 4:04 p.m., crude traded down $3.16 on the day at $64.68 a barrel. Energy stocks also took a beating.

Consumers spending, which accounts for more than two thirds of the gross domestic product, is particularly threatened by energy prices that exceed the limits of the broader economy. Because oil prices are tied to the cost of gasoline, they can divert cash to gas tanks while simultaneously driving up the cost of consumer goods.

The day's losses went deeper than the energy market, leaving every sector in a hole. Financials also took heavy damage as concerns over the fallout of the credit crisis deepened. Health care and tech fell sharply, as well.

Friday's selloff began on the other side of the world. In Asia, Japan's Nikkei lost 9.6%, while Hong Kong's Hang Seng dropped 8.3%. In Europe, the benchmark indexes of London, Paris and Frankfurt each finished down more than 3.5%.

Corporate News

• Microsoft (MSFT) posted a 2% rise in net income for its fiscal first quarter on a corporate sales boost, but the results were marred by disappointing guidance. Microsoft reported a profit of $4.37 billion, or 48 cents a share, up from $4.29 billion, or 45 cents a share, in the year-ago period. However, for the current quarter, the firm expects to earn between 51 and 53 cents a share, a bit below analysts' estimates of 55 cents. "We, like most companies, saw a slowdown at the tail end of the quarter in particular," Chris Liddell, the firm's chief financial officer, said in an interview with the Associated Press. "We're now taking a more conservative stance on the balance of the year."
• PNC Bank (PNC) continued the wholesale consolidation of the financial industry Friday when the bank announced it plans to acquire National City (NCC) in an all-stock deal worth $5.6 billion. The deal will effectively rescue Cleveland-based National City after the its own acquisitions burdened it during the credit crunch.

The Economy

• The annual rate of existing home sales rose to 5.18 million in September, up from a revised 4.91 million in August, the National Association of Realtors said. Strength in markets in the West offset weakness in the Northeast and the South. Economists had expected the rate to have risen to 4.95 million sales a year. DATA

ReadMe

• The New York Times on currencies: As more investors bail on emerging markets to stow their money in bonds, foreign currencies are markets are paying dearly. STORY
• BusinessWeek on hedge funds: Their desperate need for fast cash has caused an asset selloff, devaluing a wide array of holdings, including 401(k) plans and gold. 401(k) STORY | GOLD STORY
• The Associated Press on Wall Street layoffs: The number of jobs claimed by the financial crisis could exceed 200,000. STORY

WatchMe

• CNBC on currencies: Dariusz Kowalczyk, chief investment strategist at CFC Seymour, says the South Korean won is likely to fall further against the dollar and may reach 1,600 per greenback by the end of the year. VIDEO
• Bloomberg on the financial crisis: A review of congressional testimony from former Federal Reserve Chairman Alan Greenspan, former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox. VIDEO
• "Ocean's Eleven" (2001): George Clooney, Brad Pitt and Matt Damon do to Andy Garcia what Richard Fuld, James Cayne and Robert Willumstad have done to you, but they are more charming about the whole thing. TNT, 8 p.m.