NEW YORK — The stock market got clobbered Friday as ballooning oil prices and fresh worries about the financial sector yanked the major averages to their lowest level in three months.
The Dow Jones industrial average sank more than 200 points -- closing below the 12,000 mark for the first time since March 17 -- as trading screens across Wall Street were awash in a sea of red.
The latest losses raised the specter that the indexes could tumble below the bottoms they reached March 10.
Stocks had rebounded from those lows after the Federal Reserve-engineered takeover of Bear Stearns Cos. calmed fears of a financial-system meltdown. But investors hadn't anticipated an unrelenting rise in oil prices and a steady stream of mortgage-related write-offs at banks.
Some market analysts fear that a drop below the March troughs next week could unleash a fresh spate of selling.
"I've been receiving telephone calls from clients -- very intelligent and sophisticated clients -- and they're concerned," said Stanley Nabi, chief strategist at New York-based Silvercrest Asset Management Group. "They're tense. And if they're tense, I can imagine how concerned people with retirement plans in the market and not a great deal of money must be."
The rise in oil prices was the biggest factor weighing on stocks, said Al Goldman, chief market strategist at Wachovia Securities, adding that oil could be considered each of the stock market's top 10 problems. A further rise in energy prices could push the U.S. into a significant recession, he said.
Crude futures initially shot up nearly $5 a barrel on reports of escalating tensions between Israel and Iran, then pulled backed to settle at $134.62, up $2.69, in New York trading.
The Dow fell 220.40 points, or 1.8%, to 11,842.69, less than 1% from its March low of 11,740.15. The Standard & Poor's 500 index slumped 24.90 points, or 1.9%, to 1,317.94. The Nasdaq composite index plummeted 55.97 points, or 2.3%, to 2,406.09 as technology stocks were hit by a wave of selling.
Financial shares were especially hard hit. An index of financial stocks in the S&P 500 tumbled 3%.
Shares of Citigroup, which warned Thursday of a big second-quarter write-down of its debt holdings, tumbled 87 cents, or 4.3%, to $19.30 after a UBS analyst predicted the banking giant would post an overall loss for the period.
Merrill Lynch skidded $1.74, or 4.6%, to $35.95 as rumors circulated that the giant brokerage firm also might uncork a big credit-related write-off.
Mortgage finance giants Fannie Mae and Freddie Mac slumped after Lehman Bros. predicted it would report wider-than-expected second-quarter losses.
"The housing market continues to deteriorate at an accelerating pace," analysts at Lehman wrote in a note to clients. Fannie lost $1.19, or 4.8%, to $23.81. Freddie fell $1.83, or 7.7%, to $21.82.
Shares of some large regional banks, which have been pummeled recently, lost ground when Merrill Lynch slashed its earnings estimates for them. Wells Fargo slumped $1.13, or 4.4%, to $24.50.
But regional banks in the S&P 500 rebounded 1.7% as a group after tumbling 12% over the three preceding days.
Huntington Bancshares surged $1.53, or 30%, to $6.67 after saying its bad loans for the current quarter wouldn't exceed the forecast it previously issued. Fifth Third Bancorp rose 36 cents, or 3.7%, to $10.11 after a big shareholder said it wouldn't cut its stake immediately.
Washington Mutual edged up 3 cents to $6.38 after disclosing a plan late Thursday to cut about 1,200 jobs. Of those, 500 are in California, including 300 in Chatsworth and 70 in Irvine.
Moody's downgraded bond insurers MBIA and Ambac Financial Group. MBIA fell 86 cents, or 13%, to $5.59. Ambac rose 2 cents to $2.05, then sank 3.4% in after-hours trading.
Investors walloped General Motors and Ford Motor after Standard & Poor's indicated it might downgrade their debt because of dismal auto sales. GM fell $1, or 6.8%, to $13.79. Ford slid 51 cents, or 8.1%, to $5.81.
Shares of technology companies tumbled, led by SanDisk, which fell $2.28, or 9.7%, to $21.16 after a Citigroup analyst downgraded the maker of flash-memory cards because of weaker demand in Asia and Europe. Tech companies in the S&P 500 lost 2.5% as a group.
In other market highlights:
Government bond yields fell along with stocks. The yield on the benchmark 10-year Treasury note dropped to 4.17% from 4.21% late Thursday. The dollar fell against most other major currencies, while gold prices edged down.
For the week, the Dow fell 3.8%, the S&P 500 lost 3.1% and the Nasdaq declined 2%.
The Russell 2,000 index of smaller companies fell 12.10 points Friday, or 1.6%, to 725.73.
Overseas, key stock indexes slid 1.3% in Japan, 1.5% in Britain, 2.1% in Germany and 1.8% in France.