NEW YORK — The stock market closed out a dismal week with another sell-off Friday as investors pondered whether share prices are heading toward more bruising losses after Memorial Day.
A fresh pickup in oil prices and a drop in existing-home sales capped a week in which burgeoning optimism about the economy yielded suddenly to fears of inflation and diminished consumer spending.
The Dow Jones industrial average slumped 145.99 points, or 1.2%, to 12,479.63. For the week, it declined 3.9% and is now down 12% from its record high last in October. But the blue-chip index remains up 6.3% from its low set in March when credit-crisis anxiety hit a peak.
The sell-off fixed the spotlight clearly on next week, with analysts saying the market's performance in the days immediately after the long weekend could go a long way toward setting its tone for much of the summer.
Continued selling could feed on itself and signal that a longer-term pullback was underway, while a flat or up market would indicate that the downward pressure is contained, they said.
"It's going to be an important week because it's either going to reinforce what happened this week and set a trend or it's going to wipe out" the losses, said Paul Hickey, co-founder of investment research firm Bespoke Investment Group in Harrison, N.Y. "It's going to tell us whether it's just a short-term blip or something more."
The market's near-term health is likely to continue to hinge on oil prices. After easing on Thursday, oil resumed its climb, finishing back above $132 a barrel. Already depressed airline and automobile stocks were pummeled.
"Oil, because it's such a front-page story all of a sudden, is going to drive the short-term market," said John Buckingham, chief investment officer at Al Frank Asset Management in Laguna Beach.
Some investors have feared a so-called double dip in which the market's rally from its March lows proves to be only a temporary respite within a sustained bear market.
But optimists contend the market was due for a breather after a 10-week recovery.
"We were probably a little overdue for some sort of short-term pullback, which was exacerbated by the news of the week," Buckingham said.
Volume has been light throughout the market's recent rally as well as this week's pullback, giving ammunition to both bulls and bears.
