MARKET SNAPSHOT: U.S. Stocks Slump As Economic Worries Weigh

By Kristina Peterson

U.S. stocks dropped Friday, as a weaker euro piled on to fears of a cooling U.S. economy and energy stocks sank as the dollar jumped.

The Dow Jones Industrial Average (DJI) fell 113 points early afternoon trade. The measure is now firmly in the red for the week, as disappointing jobs and manufacturing data wiped out gains from excitement over a resurgence in global merger activity.

Friday's slide in the euro reminded investors of lingering sovereign debt concerns and added to the week's push-and-pull between encouraging corporate news and persistent reminders of the struggling global economic recovery. Light trading in August has kept the market bouncing in a narrow range.

"The market, being range-bound, is at the mercy of whoever last spoke and the most recent number. It is very frenetic in its reaction to news," said Liz Ann Sonders, chief investment strategist at Charles Schwab. Providing the most recent, if limited, lift has been the jump in deal activity, which this week rose to its highest levels since late 2009.

"It probably unleashes some values and shows that companies see opportunities to grow their business and are not in lockdown mode, but I don't think it's necessarily the elixir for the overall economy or the market as a whole," Sonders said.

The Dow fell 1.1% to 10,159. Among the measure's worst performers, manufacturing giant 3M (MMM) shed 1.9%, Caterpillar (CAT) fell 2.2% and General Electric (GE) dropped 1.8%.

The Nasdaq Composite (RIXF) shed 0.8% to 2,162. The Standard & Poor's 500-share index (SPX) dropped 1% to 1,065.

Energy stocks led Friday's decline as crude-oil prices recently fell below $74 a barrel. Sterne Agee & Leach cut its stock-investment ratings on land drillers to "neutral" from "buy," citing rising service costs, among other factors. Nabors Industries fell 4.1%, while Patterson-UTI Energy (PTEN) fell 5.3% and Helmerich & Payne (HP) slid 4.4%.

Multinational companies with overseas operations also slid as the euro weakened. The common currency fell after a European Central Bank official suggested monetary policy should remain loose until next year.

The euro fell to a one-month low against the dollar after Deutsche Bundesbank President Axel Weber said the speed of the European Central Bank's withdrawal from its anti-crisis measures will depend on the health of the euro area's banks, in an interview with Bloomberg TV on Friday.

Weber's comments suggest that even hawks on the ECB's governing council are still more concerned about the fragility of the euro area's banks than they are about inflation.

"We've had this very substantial divergence between company reports and what the macro data are saying over the course of the past month," said Keith Hembre, chief economist and chief investment strategist at First American Funds of Minneapolis. "The data just point to very little in the way of growth here in the third quarter."

The euro was recently trading at $1.2668, down from $1.2819 late Thursday in New York. The U.S. Dollar Index (DXY), which tracks the currency against a basket of six others, jumped 1%. Demand for safe-haven Treasurys rose, pushing yield on the 10-year note (UST10Y) down to 2.56%. The two-year note's yield hit a record low of 0.455% overnight, but edged up slightly in recent trading to 0.49%.

Among stocks in focus, Hewlett-Packard (HPQ) dropped 3.2%, even as its profit climbed 6.1% on higher world-wide sales in its fiscal third-quarter, the technology giant's final quarter with Mark Hurd at its helm. But investors have been skittish about H-P since Hurd left the company two weeks ago, during which the stock has lost about 12% of its value.