Stocks tumbled for a second day Friday after concerns grew that the deep spending cuts under Europe's bailout plan would slow a global recovery.
The Dow Jones industrial average ended down 163 points but closed well off its lows of the day. The Dow and other indexes posted big gains for the week after rocketing higher Monday on hopes that Europe's emergency loan package would prevent a debt crisis in Greece from spreading. Enthusiasm about the plan wore off as the week went on.
The drop in U.S. markets Friday followed a slide of more than 3 percent in European indexes. The euro dropped to a 19-month low against the dollar and is close to its lowest level in four years as confidence in Europe's ability to contain its fiscal problems wanes.
Investors seeking safety piled into Treasurys and the dollar. Gold settled lower after hitting another record. Crude oil sank nearly 4 percent, and an indicator of stock market volatility jumped.
Currency traders have been moving out of the euro throughout the week because of concerns that cost-cutting measures in countries like Greece, Spain and Portugal would slow economic activity on the continent and elsewhere. Now stock investors are also looking at those same problems.
Shifting sentiment about the problems in Europe whipsawed the market during the week. Major indexes posted their biggest gains in more than a year on Monday after the nearly $1 trillion rescue package from the European Union and International Monetary Fund raised hopes that debt-strapped EU countries wouldn't be a drag on a global rebound.
As the glow from the bailout package faded during the week, the euro fell sharply against the dollar. The higher dollar hit the prices for oil and other commodities, hurting major U.S. energy and materials companies.
"The euro is leading the market down," said Uri Landesman, president of Platinum Partners in New York. "Clearly the action in the euro is reflecting the fact that at least currency investors don't think the bailout plan plus the austerity measures are sufficient."
Investors now worry that the spending cuts in Europe being called for in the bailout package will curtail the ability of weaker countries like Spain and Portugal to grow their way out of a recession. More strikes are expected in Spain and Greece as workers protest cuts in pensions and other public spending.
"Austerity generally is antigrowth. There is every possibility that they go into a recession over there," said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh.
The euro, which is used by 16 countries, slid as low as $1.2355 in New York, its weakest point since October 2008. The euro has dropped more than 6 percent since the beginning of the month.
There were also concerns Friday about corporate profits. Shares of credit card companies tumbled after the Senate voted to force them to reduce fees for debit card transactions. Visa fell 9.9 percent, while Mastercard lost 8.6 percent.
The Dow fell 162.79, or 1.5 percent, to 10,620.16. The Dow had been down nearly 246 points. It has fallen seven of the last nine days.
The Standard & Poor's 500 index lost 21.76, or 1.9 percent, to 1,135.68, while the Nasdaq composite index fell 47.51, or 2 percent, to 2,346.85.
Analysts said that stocks ended off their worst levels because traders aren't sure what leaders in Europe might do over the weekend to shore up confidence in the euro and the EU overall. The bailout announcement came on a Sunday last week.
The market ended off its lows but it was still a wild week for investors. After jumping 405 points on Monday, the Dow slipped Tuesday and jumped 149 points on Wednesday. The gains helped the Dow erase its losses from late in the prior week when fears about debt woes in Greece pounded the market.
Selling resumed Thursday to send the Dow down about 114 points after more worries emerged about the cost of the European rescue.
For the week, the Dow rose 2.3 percent, the S&P 500 index added 2.2 percent and the Nasdaq gained 3.6 percent.
Treasurys jumped Friday, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.53 percent late Thursday.
The Chicago Board Options Exchange's Volatility Index — known as the market's fear gauge, jumped 17.1 percent.
Gold hit a record of $1,249.70 an ounce before settling down $1.40 to $1,227.80.
Crude oil fell $2.79 to $71.61 per barrel on the New York Mercantile Exchange.
Investors looked past improved reports on April retail sales and industrial production. Reports are due next week on manufacturing, housing and inflation.
Among stocks, Visa Inc. fell $8.47 to $77.26 and Mastercard Inc. fell $19.86 to $212.45 after the Senate vote to curb fees on debit cards.
About seven stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Thursday.
The Russell 200 index of smaller companies lost 15.87, or 2.2 percent, to 693.98.
Britain's FTSE 100 dropped 3.1 percent, Germany's DAX index fell 3.1 percent, and France's CAC-40 tumbled 4.6 percent.