By Dina ElBoghdady
Washington Post Staff Writer
Saturday, May 8, 2010; A09
Another chaotic day of trading drove down U.S. stocks on Friday as investors remained rattled by the previous day's freakish plunge in the markets and largely ignored an upbeat report about job gains.
Stocks lingered in negative territory for most of the day as the financial troubles roiling Europe loomed large. In early trading, major U.S. stock indicators were down, with the Dow Jones industrial average slipping as much as 2.7 percent Friday morning before rebounding and then falling again.
The Dow dropped 1.3 percent, or 139.89 points, to close at 10,380.43. The Standard & Poor's 500-stock index, a broader measure of U.S. stocks, fell 1.5 percent, or 17.27 points, to 1110.88. The tech-heavy Nasdaq took the biggest hit, tumbling 2.3 percent, or 54 points, to 2265.64.
For the week, the Dow lost 5.7 percent, putting it in the red for the year. The S&P 500 was down 6.4 percent for the week and Nasdaq was off 7.9 percent, with yearly gains wiped out on both indices.
The declines Friday were nowhere near as sharp as those on Thursday, when the Dow plunged nearly 1,000 points in minutes before regaining most of its losses to close at a 3.2 percent loss.
Thursday's gyrations were caused by fears that the debt crisis in Greece would spread to other European countries, and may have been exacerbated by a larger structural flaw in U.S. markets.
On Friday, regulators and market officials struggled to figure out what was behind the previous day's mayhem. Rep. Paul E. Kanjorski (D-Pa.), chairman of the House Financial Services Committee's subcommittee on capital markets, insurance and government sponsored enterprises, said his panel will soon examine high-frequency trading, which involves rapid-fire stock trades initiated by computerized systems and has been blamed by some for Thursday's turmoil.
Meanwhile, investors still reeling from Thursday's wild trading were reluctant to stay in the market through the weekend in case there's a dramatic turn of events, said Phil Orlando, chief equity market strategist at Federated Investors in New York. "You'd be better off out of the market today and come back in and reevaluate the developments on Monday," he said.
Friday's losses followed sharp declines in European and Asian markets. Britain's benchmark FTSE 100 index fell 2.6 percent and Germany's Dax was down 3.3 percent. In Japan, stocks fell 3.1 percent, hitting a two-month low.
On Sunday, the International Monetary Fund is expected to approve its portion of a financial rescue package offered to Greece last weekend. The 16 European nations that use the euro must also approve the package. Germany did so on Friday.
President Obama made a reference to Thursday's "unusual market activity" at a briefing Friday on a Labor Department report showing that U.S. employers had added 290,000 jobs in April, the largest monthly gain since March 2006.
"The regulatory authorities are evaluating this closely, with a concern for protecting investors and preventing this from happening again," Obama said about Thursday's trading activity.
Market officials and regulators are unwinding millions of the trades that occurred on the electronic exchanges Thursday. Nasdaq took the extraordinary measure Thursday of canceling all trades of stocks that occurred from 2:40 p.m. to 3 p.m. at prices 60 percent below what was listed prior to that period.