Blue-chip stocks fell anew Friday, ending a bad week on a sour note.
Meanwhile, long-term bond yields dropped to their lowest level since April 3, as some investors shed stocks in favor of bonds. The dollar continued to gain on worries about the global economy.
On Wall Street, the Dow Jones industrials held up well for most of the day, only to turn sharply lower in the last hour.
The Dow ended down 70.25 points, or 0.8%, at 8,899.95--its lowest close since April 28.
Most broader indexes also fell, although the market's breadth was positive, with 1,716 stocks rising on the New York Stock Exchange and 1,242 falling.
The Russell 2,000 index of smaller stocks eked out a 0.2% gain for the day, to 456.62. But for the week the Russell sank 1.4%, after a 2% decline the week before.
The Dow lost 214.49 points for the week, or 2.4%, as the selling wave that has struck smaller stocks in recent weeks finally hit blue chips.
Technology stocks led the list of Friday's losers, as investors sold off companies that could be most affected by continued economic woes in Asia.
"Technology has driven the market for the past seven years, and my sense is it won't lead this year," said John Rutledge, an analyst with Keystone Investment Management Co.
Asia's deepening crisis was the catalyst for much of this week's turmoil in the U.S. market and in Latin American markets. News that the Russian government is facing a cash crisis also spurred some selling, as did Pakistan's decision to test atomic bombs.
What's more, the government reported Thursday that overall U.S. corporate profits fell in the first quarter, after also dropping in the fourth quarter.
Analysts say investors may just be waking up to the reality that profits are being squeezed by rising wages, weakened overseas demand for U.S. exports and rising competition from cheaper imports.
"The market's going to go through a choppy phase until such time as second-quarter profit numbers are released in July," said John Shaughnessy, chief investment strategist at Advest Group. "We need a clarification of the earnings picture, a clarification of the Asian damage."
The strong dollar, which exacerbates the import-export situation, got stronger on Friday: The dollar rose to 1.786 German marks from 1.780 on Thursday, and to 138.90 yen, up 0.09 yen, after reaching a seven-year high of 139.22.
The mark was weakened by Russia's problems. The Russian stock market slid 3.8% on Friday, the ruble weakened further, and Moody's credit rating service warned that Russia was more likely to default on bond payments.
In Japan, the government said the unemployment rate hit 4.1% in April, the highest on record.
Asian stock markets were mixed Friday. Hong Kong gained 0.6% and South Korea rose 4.2%, while Taiwan fell 2.7% and Japan lost 0.8%.
For the week, nearly every major foreign market lost ground. Hong Kong was off 6.5%, South Korea lost 4.8%, Japan fell 0.8% and Brazil gave up 3.8%.
What was bad for stock markets, however, was good for U.S. bonds: The yield on the 30-year Treasury bond closed at 5.80% on Friday, down from 5.82% on Thursday and the lowest since April 3.
Bonds are benefiting from the robust dollar, "safe haven" status, and from the growing perception that the U.S. economy is on the verge of slowing.
"There is an awful lot going on overseas," said Patricia Larkin, who manages $35 billion in fixed-income assets at Dreyfus Corp. "The economy seems to be slowing because of that."
Analysts say the stock market is caught between the good news of lower yields and the bad news of weak corporate earnings.
Among Friday's highlights:
* The tech sector was led lower by IBM, down $2.56 to $117.50; Intel, down $2.06 to $71.44; Hewlett-Packard, down $1.56 to $62.31; Microsoft, down $1.50 to $84.81; and Dell, down $2.22 to $82.41.
Remec plunged $6.50 to $14.38. The maker of wireless communications equipment warned of possibly weaker sales.
* Drug stocks were hit by profit-taking. Merck fell $1.94 to $117 and Warner-Lambert lost $2.13 to $63.81.
* Many industrial issues gave ground on concerns about the global economy. GE fell $1 to $83.38, Georgia-Pacific sank $1.19 to $64.19 and DuPont slid $2.25 to $77.19. But Goodyear surged $3 to $71.88. And AlliedSignal jumped $1.63 to $42.75 after announcing a $2.2-billion stock buyback.
* Utilities rallied with bonds. The Dow utility index leaped 1.4% after gaining 1.2% on Thursday. Among other interest-rate-sensitive stocks, mortgage giant Freddie Mac rose $1.31 to $45.50.
Market Roundup, D6