Stocks had a rough day, opening slightly lower, only to sink sharply following a weak consumer confidence report. But the knee jerk reaction was short lived, and stocks bounced back into positive territory before settling into a malaise for much of the day.

All indices closed the day in positive territory, but still remained down for the year. The Dow Jones industrial average (INDU) moved up 20 points, or 0.2%, to 11,559.95.

Financial stocks remained under pressure, with Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) down between 1% to 3.5%.

The S& P 500 (SPX) rose 3 points, or 0.2% to 1212.92 while the Nasdaq (COMP) added 14 points, or 0.6% to 2576.11. Research in Motion (RIMM), Baidu (BIDU), and Netflix (NFLX) were among the biggest winners on the tech-heavy index.

Stocks got a bit of a late-day bounce from the release of the Federal Reserve minutes. The minutes revealed that some committee members advocated another round of Treasury purchases to jumpstart the economy, known as quantitative easing or QE3. Despite a low volume trading day, investors who had been sitting on the sidelines with cash opted to buy in after the minutes were released.

Still equity markets didn't make much headway as fears of another recession muted investors' optimism.

Bank of America still not out of the woods

" Fear of a recession can become a self-fulfilling prophecy," said Joseph Tanious, vice president and market strategist at J.P. Morgan Funds. " Consumers are clearly experiencing a crisis of confidence, and this morning's numbers only reinforce that view."

Early Tuesday morning, investors were spooked by a report that showed consumer confidence sunk to its lowest level in more than two years, but the knee-jerk reaction quickly faded.

" It's not surprising that people are saying they're more worried about the economy now," says Kate Warne, chief market strategist at Edward Jones. " It's less certain that it translates into a dramatic change in behavior. Even when consumers become more cautious, they don't always spend less."

Still Tanious says that investors were able to shrug off the low confidence numbers because of a few bright spots in economic data including consumer spending numbers on Monday that were better than expected.

Surprising six-figure salaries

Stocks have had a rough month. A downgrade by Standard & Poor's in early August acted as the catalyst for two weeks of wild swings as investors feared the U.S. would tip back into a recession. In fact, August is on track to be worst month for stocks since May 2010.

On Monday, U.S. stocks rallied following a trifecta of positive news: a Greek bank deal, a solid U.S. consumer spending report, and relief that Hurricane Irene caused less damage than expected.

Economy: Home prices rose 3.6% during the second quarter, according to the Case-Shiller 20-city home price index. That was the first quarterly increase in prices in a year.

But home prices are still down 5.9% from a year earlier. Economists were expecting a year-over-year decline of 4.7%.

Companies: Shares of Dollar General (DG, Fortune 500) ended the day up 6%, after the retailer beat second-quarter earnings and sales estimates. The retail company lifted its same-store sales guidance for the remainder of the year. During the second quarter, investing guru Warren Buffett added a $50.8 million stake in Dollar General.

Shares of Barnes & Noble (BKS, Fortune 500) closed teh day up 16% after the bookseller reported a quarterly loss and sales that fell short of expectatons but investors appeared to focus on strong demand for the retailer's Nook tablet.

Currencies and commodities: The dollar gained ground against the euro and British pound, but fell versus the Japanese yen.

Oil for October delivery jumped $1.50, or 1.7% to $88.50 a barrel.

Gold for December delivery rose $41, or 2.3% to $1,832 an ounce.

Pimco's bad bond bet

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.18% from 2.27% late Monday.

World markets: European stocks ended the day with mixed results. Britain's FTSE (UKX) 100 rose 4%, and France's CAC 40 (CAC40) added 0.2%, while the DAX (DAX) in Germany fell 0.5% .

Asian markets ended the session mixed. The Shanghai Composite (SHCOMP) fell 0.4%, while the Hang Seng in Hong Kong (HSI) climbed 1.7% and Japan's Nikkei (N225) rose 1.2%. 

The pullback -- which briefly sent the Dow down nearly 190 points on Tuesday afternoon -- came after three straight sessions of healthy gains.

At the market close, the Dow Jones industrial average (INDU) was down 77 points, or 0.7%. The S& P 500 (SPX) lost 12 points, or 1%, and the Nasdaq composite (COMP) dropped 32 points, or 1.2%.

German Chancellor Angela Merkel and French President Nicolas Sarkozy met to discuss measures announced last month to contain the sovereign debt crisis and protect the euro.

Investors were particularly disappointed that Sarkozy and Merkel said the size of the 440 billion euro stability fund is sufficient, despite economists' push to greatly expand the bailout fund. Some are even calling for funding of more than 1 trillion euro.

The leaders also agreed that issuing eurobonds, a collective bond to help pay off the debt of the peripheral countries, will not solve the European debt crisis.

" The market was pinning its hopes for possible solutions on the outcome of a meeting today between French and German government leaders," said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors. " The outcome of the meeting was clearly not what the markets wanted."

The leaders also proposed a financial transaction tax, which sent shares of exchange operators NYSE Euronext (NYX, Fortune 500) and NASDAQ OMX Group (NDAQ) down by 8% and 3%, respectively.

Euro bonds: Magic bullet for debt crisis?

Jillian Miller, an analyst at BMO Capital Markets, said those drops were perhaps a bit premature, since all 27 eurozone countries would have to approve the tax, and there appears to be no consensus on the issue.

Before trimming earlier losses to trade flat ahead of the European leaders' press conference, U.S. stocks were under pressure as nearly stagnant economic growth in Europe stoked fears of a regional and global slowdown.

" The focus is back on Europe and its debt problems," said Dave Hinnenkamp, CEO at KDV Wealth Management. " The eurozone economy has some problems, which is an important concern for the global economy."

Lackluster economic growth in Germany, Europe's largest economy, weighed on the broader region's economy. Gross domestic product for the eurozone, which is made up of the 17 nations that use the euro, grew by a tepid 0.2% from the prior quarter -- and by 1.7% on an annual basis.

The quarterly pace of economic growth was the slowest since the end of the recession. The decline in output intensifies concerns about the future viability of the 12-year old currency union.

European economy hits a wall

The long-running debt crises in Greece, Portugal and Ireland accelerated in the second quarter, and investors are also worried that Europe's larger economies -- including Spain and Italy -- may need to be bailed out.

" The data confirm that the region's core economies are in no position to support the periphery, adding to the already significant risk of an eventual eurozone break-up," said Jennifer McKeown, senior European economist at Capital Economics, in a note to clients.

With the focus on Europe, investors largely shrugged off Fitch Ratings' affirmation of the AAA credit rating and " stable" outlook for the U.S.

Earlier this month, Standard and Poor's downgraded the nation's credit rating to AA+. And while Moody's maintained the sterling AAA credit rating, the agency lowered its outlook on U.S. debt to " negative."

On Monday, U.S. stocks moved solidly higher with major indexes rising about 2%, as merger activity -- particularly Google's (GOOG, Fortune 500) bid for Motorola Mobility (MMI) -- set a positive tone on Wall Street.

Economy: The government reported import prices for July rose 0.2%, excluding oil, after a 0.1% decline in the prior month. Excluding agriculture, exports increased by 0.2%. The data followed a 0.1% increase in June.

Housing starts fell 1.5% in July to an annual rate of 604,000, while permits to build new homes slumped 3.2%. Both reports came in worse than expected.

The Federal Reserve said that industrial production rose 0.9% in July, while capacity utilization climbed to 77.5% last month. Both readings came in slightly above economists' expectations.

Companies: Second-quarter results continued to roll in Tuesday.

Shares of Home Depot (HD, Fortune 500) rose 5%, after the home improvement retailer beat earnings and sales expectations and lifted its outlook for the year.

Wal-Mart (WMT, Fortune 500) raised its full-year profit forecast as second-quarter earnings topped estimates by a penny, and sales rose 5.5% to $108.6 billion. The stock jumped 4%.

The two retailers were the biggest gainers on the Dow and S& P 500.

Shares of Urban Outfitters (URBN) dropped 6%, dragging on the S& P 500 and Nasdaq. While the hip retailer posted second-quarter earnings and sales ahead of expectations, the company's CEO warned of disappointing sales in August.

Dell (DELL, Fortune 500) reported earnings per share of 54 cents on revenue of $15.7 billion after the market close. The company hit on earnings, but missed on sales and its guidance looked weak, sending shares down 5% in afterhours trading.

World markets: European stocks trimmed deeper losses from earlier in the day and finished mixed. Britain's FTSE (FTSE) 100 rose 0.1%, Germany's DAX (DAX) fell 0.5% and France's CAC (CAC) 40 fell 0.3%.

Asian markets ended mixed. The Shanghai Composite dropped 0.7% and the Hang Seng in Hong Kong fell 0.2%, while Japan's Nikkei added 0.2%.

Currencies and commodities: The dollar was higher against the euro, but lost ground versus the British pound and the Japanese yen.

Oil for September delivery slipped $1.23 to $86.65 a barrel.

Gold futures for December delivery rose $27 to $1,785 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.23% from 2.28% late Monday.

The Dow Jones industrial average (INDU) rose 214 points, or 1.9%, to end at 11,482.90. The S& P 500 (SPX) added 26 points, or 2.2% and the Nasdaq (COMP) gained 47 points, or 1.9%.

The return of " Merger Monday" boosted investor sentiment. Google agreed to buy Motorola Mobility for $12.5 billion, the two companies said Monday.

Shares of Motorola Mobility (MMI) surged 56%, leading the gains on the S& P 500. The merger also helped boost shares of BlackBerry maker Research in Motion (RIMM) as well as Nokia Corp (NOK).

Bank of America's (BAC, Fortune 500) stock spiked 7.9% after the bank said it is selling its credit card business in Canada to TD Bank Group for $8.6 billion, and is exiting its credit card businesses in the U.K. and Ireland.

Shares of offshore drilling contractor Transocean (RIG) rose 3% after it announced plans to buy Norway's Aker Drilling for $1.4 billion.

" Companies have been hoarding cash since 2008 due to the uncertainty of the economic climate, so the fact that they're putting that cash to work is a huge positive," said Peter Tuz, president of Chase Investment Counsel. " It shows that managements are optimistic."

Stocks ended one of the biggest roller-coaster weeks ever on a relatively quiet note Friday, with the Dow climbing 126 points to post its second gain in a row. Earlier last week, the indexes swung wildly between gains and losses of 4% to 5% a day.

But on Monday, Wall Street's key measure of volatility slipped. The CBOE Volatility index, or the VIX (VIX), fell about 12.5% to 31.8. A VIX reading higher than 30 is considered a sign that investors are getting worried -- but Monday's reading was much lower than last week's levels.

Computers rule Wall Street

The market turmoil was sparked by fear among investors that Europe is heading toward a financial catastrophe, and that the U.S. is slipping into another recession.

While those fears haven't completely disappeared, investors are seeking bargains in stocks following three weeks of losses, said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors.

Companies: Second-quarter results for home improvement chain Lowe's (LOW, Fortune 500) fell short of expectations. The company also trimmed its forecast for the year. Lowe's shares slipped 1.6% earlier in the session, but recovered to rise 0.9% by the end of the day.

After the bell, retailer Urban Outfitters (URBN) reported second-quarter earnings that topped Wall Street estimates. Shares gained nearly 6% in after hours trading.

World markets: European stocks finished with modest gains. Britain's FTSE (FTSE) 100 rose 0.6%, Germany's DAX (DAX) added 0.4% and France's CAC (CAC) 40 edged up 0.8%.

Investors welcomed news Monday morning that the Japanese economy contracted during the second quarter by much less than economists were expecting, following the devastating earthquake that hit in March.

Japan's gross domestic product shrunk by 0.3% last quarter, or 1.3% on an annualized basis.

Asian markets ended with solid gains. The Shanghai Composite rose 1.3%, the Hang Seng in Hong Kong jumped 3.3.% and Japan's Nikkei climbed 1.4%.

Economy: The positive news about mergers and Japan's economy helped offset a disappointing report on regional manufacturing activity.

The Empire State manufacturing index showed that factory activity contracted for a third straight month in August. The figure fell to minus 7.72 from minus 3.76 the prior month. The reading was worse than the minus 0.4 economists surveyed by Briefing.com were expecting.

Currencies and commodities: The dollar was lower against the euro and the British pound, but it advanced slightly versus the Japanese yen.

Oil for September delivery rose $2.50 to settle at $87.88 a barrel.

Gold futures for December delivery added $15.40 to settle at $1,758 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell slightly, pushing the yield up to 2.28%. 

The Dow Jones industrial average (INDU) rallied 430 points, or 4%. The S& P 500 (SPX) added 53 points, or 4.7% and the Nasdaq (COMP) gained 125 points, or 5.3%.

Immediately following the Fed's statement, the major indexes all briefly slid into the red -- with the Dow dropping more than 200 points. The Dow fluctuated by more than 600 points during Tuesday's session.

In its latest monetary policy statement, the Federal Reserve left key interest rates unchanged, saying that deterioration in the labor market and slower-than-expected economic growth will require the central bank to keep rates " exceptionally low" until the middle of 2013.

Read the Fed statement

A survey of investors conducted by investment firm Nomura before the Fed's statement showed that 22% of market participants had been looking for the Fed to announce more quantitative easing to help prop up the economy.

" It's hard to know what this means and how we should react," said Stephen Leeb, president of Leeb Capital Management. " It's disappointing they didn't announce further Treasury repurchases, but they did announce that rates will stay low for two years -- which is a big deal."

Knowing that rates will stay low for at least two years adds certainty to an otherwise uncertain economic environment, said Leeb.

" It means business owners can hire employees, and people can take out mortgages without having to worry about a spike in short-term interest rates," he said.

U.S. stocks have fallen more than 10% in the last month, and Monday's beating was by far the most brutal session. Stocks posted their worst losses since the 2008 financial crisis Monday, in the aftermath of S& P's downgrade of the U.S. credit rating.

Stocks at 'fire sale' prices after bloodbath

So given those sharp declines, it was almost inevitable that markets would ultimately end higher Tuesday, said Sal Arnuk, co-founder of Themis Trading. Since 1927, there have been 31 one-day declines like the 7% drop in the S& P 500 seen Monday, he said. And of those instances, the S& P turned positive the next day 79% of the time.

But that doesn't mean investors aren't still rattled by the struggling U.S. economy and the European debt crisis.

" I've still got my helmet on," Lee Smith, vice president of Cozad Asset Management said. " The sell-off yesterday was overdone, so I'm starting to dip one foot back in the market -- but confidence is so weak right now, I don't have both feet back in yet."

All three major indices sank between 5% and 7% Monday, pushing the Dow below 11,000 for the first time since last November. The sell-off, which amounted to a paper loss of about $1 trillion, was worse than the 512-point drop stocks experienced just three trading sessions before.

Big movers: Bank stocks were among the hardest hit during Monday's slide -- with Bank of America shares tumbling 20%, after AIG (AIG, Fortune 500) said it is suing the bank for billions of dollars over mortgage security fraud.

Banks are bad, but it's not 2008

But Bank of America's (BAC, Fortune 500) stock recouped most of those losses Tuesday, with shares closing 17% higher. Other financial stocks such as JPMorgan Chase (JPM, Fortune 500) andAmerican Express (AXP, Fortune 500) rebounded about 7%, and Citigroup (C, Fortune 500) soared more than 14%.

Gains spilled over to the broader market, with all 30 of the Dow's components ending in the green. Boeing (BA, Fortune 500) and Alcoa (AA, Fortune 500) were among the biggest winners Tuesday -- both rising more than 6%.

Currencies and commodities: The dollar was lower against the euro and Japanese yen, but rose versus the British pound.

Oil for September delivery slid $2.01 to settle at $79.30 a barrel.

Gold futures for December delivery gained $29.80 to settle at $1,743 an ounce. Earlier, gold prices hit a record intraday high of $1,782.50 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose following the Fed's statement, pushing the yield down to 2.18% from 2.34% late Monday.

The U.S. Treasury Department plans to sell $72 billion in bonds this week. Its first auction was held Tuesday, during which the government sold $32 billion in 3-year notes. The bid-to-cover ratio, a measure of demand, came in roughly in line with other recent 3-year note auctions -- an indication that investors are not afraid to stash their money in Treasuries, even with the warning from S& P.

World markets: European markets finished mixed. Britain's FTSE (FTSE) 100 gained 1.9% and France's CAC (CAC) 40 jumped 1.6%, while the DAX (DAX) in Germany dipped 0.1%.

Asian markets were also volatile, but ended in the red. Japan's Nikkei dropped 1.7%, but was well off its lows at the close. A late sell-off pushed the Hang Seng in Hong Kong down 5.7%, and the Shanghai Composite was just below breakeven.

Economy: Productivity of U.S. workers slipped 0.3% during the second quarter, after falling 0.6% the prior quarter. Labor costs rose by 2.2%.

Companies: AOL (AOL) reported a bigger-than-expected quarterly loss early Tuesday -- driving shares of the media giant 11% lower.

After the closing bell, Dow component Walt Disney (DIS, Fortune 500) will head to the earnings stage. The media giant is expected to report a profit of 73 cents a share.  

NEW YORK (CNNMoney) -- European stocks turned lower Monday as action to bolster faltering eurozone nations couldn't completely overcome concerns about Standard & Poor's downgrade of U.S. debt. Asian markets finished sharply lower.

U.S. stock futures, which came off earlier lows to their best levels of the overnight period after Europe posted some gains, slipped again as the market open drew nearer.

The European Central Bank signaled in a statement Sunday that it was ready to begin buying Italian and Spanish government bonds, stepping up its efforts to slow the rising panic over the euro zone's debt crisis. In a separate announcement, finance ministers from the G-7 -- a group of significant world economies -- pledged support for troubled countries.

The ECB action appeared to temper the reaction to Friday's S& P downgrade that removed the United States' AAA status for the first time. But after early gains, European markets retreated.

Paris' CAC-40 index, up more than 1% in the first hour, was down 0.1%. London's FT-100 pulled back from a 1% advance to slip 0.1%.

Frankfurt's DAX, which was only briefly higher, lost 0.7%.

Indexes for exchanges in Spain and Italy, the focal points of the ECB action, were about 2% higher.

Europe's early gains appeared to give a lift to U.S. stock futures. Bu

S& P 500 futures fell 16.80 points, or 1.4%, according to data from the Chicago Mercantile Exchange. They were down by as much as 36.80 points.

Nasdaq-100 futures contracts slipped 33.50 points, or 1.5%. They were down as much as 63.50 points earlier.

Dow Jones industrial average futures were 151 points, or 1.3%, lower after being down as much as 309 points earlier

Futures trades were the first gauge of investor sentiment following Friday night's downgrade, . They give an indication of how investors will react when regular-hours U.S. trading begins at 9:30 a.m. ET Monday.

Asian markets were the first to react to the downgrade, opening lower and staying down throughout the session.

In Tokyo, the Nikkei index finished with a loss of 202 points, or 2.2%, at 9,097.56. The sell-off was not as severe as Friday's 3.7% drop that followed the huge drop in U.S. stocks on Thursday.

The mood on the Tokyo Stock Exchange floor was described as " tense" by Tsutomu Yamada, kabu.com market analyst. But he said actions taken by Western finance leaders and Treasury buying by Japan mean that the initial reaction in Tokyo won't be as bad as some experts had predicted.

The Shanghai composite index tumbled 3.8%, while Hong Kong's Hang Seng index ended with a loss of 2.2%.

South Korea's KOSPI index ended down 3.8%, after being down as much as 5.5% and forcing a short trading halt. In Australia, the All Ordinaries index closed with a decline of 2.7%.

S& P's downgrade followed last week's debt-ceiling agreement that " falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

The ratings agency also blasted the partisan bickering that led to the debt ceiling fight. " The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed," S& P said.

Ahead of the start of futures trading, most economists and investment strategists said that while there could be an initial shock, the downgrade itself should not impact markets too much.

" S& P doesn't know anything that investors don't already know, so the downgrade should not change expectations and interest rates," said Martin Feldstein, Harvard economist and former head of the National Bureau of Economic Research.

Among other developments Sunday, the White House announced that Treasury Secretary Tim Geithner will be staying at his post. An administration official told CNN that Geithner will stay until at least fall of 2012.

--CNN's Kyung Lah in Tokyo and Jiyeon Lee in Seoul contributed to this report. 

NEW YORK (CNNMoney) -- European stocks were mostly positive in the first hour of Monday trading as action to bolster faltering eurozone nations tempered concerns about Standard & Poor's downgrade of U.S. debt. Asian markets finished sharply lower.

Europe's initial moves had a positive impact on U.S. stock futures, which came off earlier lows to their best levels of the overnight period before slipping again.

The European Central Bank signaled in a statement Sunday that it was ready to begin buying Italian and Spanish government bonds, stepping up its efforts to slow the rising panic over the euro zone's debt crisis. In a separate announcement, finance ministers from the G-7 -- a group of significant world economies -- pledged support for troubled countries.

The ECB action appeared to temper the reaction to Friday's S& P downgrade that removed the United States' AAA status for the first time. Paris' CAC-40 index gained 0.3% in early trading. After falling in the first minutes of trading, London's FT-100 was up 0.7%.

Frankfurt's DAX straddled the breakeven point, slipping 0.1%.

Indexes for exchanges in Spain and Italy, the focal points of the ECB action, were more than 2% higher.

The gains in Europe appeared to give a initial lift to U.S. stock futures.

S& P 500 futures fell 15.30 points, or 1.3%, according to data from the Chicago Mercantile Exchange. They were down by as much as 36.80 points.

Nasdaq-100 futures contracts slipped 30.50 points, or 1.4%. They were down as much as 63.50 points earlier.

Dow Jones industrial average futures were 153 points, or 1.3%, lower after being down as much as 309 points earlier

Futures trades were the first gauge of investor sentiment following Friday night's downgrade, . They give an indication of how investors will react when regular-hours U.S. trading begins at 9:30 a.m. ET Monday.

Asian markets were the first to react to the downgrade, opening lower and staying down throughout the session.

In Tokyo, the Nikkei index finished with a loss of 202 points, or 2.2%, at 9,097.56. The sell-off was not as severe as Friday's 3.7% drop that followed the huge drop in U.S. stocks on Thursday.

The mood on the Tokyo Stock Exchange floor was described as " tense" by Tsutomu Yamada, kabu.com market analyst. But he said actions taken by Western finance leaders and Treasury buying by Japan mean that the initial reaction in Tokyo won't be as bad as some experts had predicted.

The Shanghai composite index tumbled 3.8%, while Hong Kong's Hang Seng index ended with a loss of 2.2%.

South Korea's KOSPI index ended down 3.8%, after being down as much as 5.5% and forcing a short trading halt. In Australia, the All Ordinaries index closed with a decline of 2.7%.

S& P's downgrade followed last week's debt-ceiling agreement that " falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

The ratings agency also blasted the partisan bickering that led to the debt ceiling fight. " The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed," S& P said.

Ahead of the start of futures trading, most economists and investment strategists said that while there could be an initial shock, the downgrade itself should not impact markets too much.

" S& P doesn't know anything that investors don't already know, so the downgrade should not change expectations and interest rates," said Martin Feldstein, Harvard economist and former head of the National Bureau of Economic Research.

Among other developments Sunday, the White House announced that Treasury Secretary Tim Geithner will be staying at his post. An administration official told CNN that Geithner will stay until at least fall of 2012.

--CNN's Kyung Lah in Tokyo and Jiyeon Lee in Seoul contributed to this report. 

NEW YORK (CNNMoney) -- It was a wild ride on Wall Street.

Stocks ended Friday on a mixed note after violently whipsawing throughout the day. The Dow had a massive trading range of 400 points as investors scrambled to make sense of a whirlwind of news.

Deep investor concerns about the U.S. economy and the European debt crisis caused heavy damage to U.S. stocks this week. All three indexes had their worst week since the darkest months of the 2008-09 financial crisis.

The Dow Jones industrial average (DJIA) rose 61 points, or 0.5%, to close at 11,445. The Dow at one point was down nearly 240 points.

The blue chips were lifted by shares of Kraft (KFT, Fortune 500) and Procter & Gamble (PG, Fortune 500), while the biggest drag on the Dow were shares of Bank of America (BAC, Fortune 500), which fell more than 7%.

The S& P 500 (INX) fell less than a point, or 0.1% to 1,199 and the Nasdaq Composite (COMP) slid 24 points, or 1%, to 2,532.

The Dow fell nearly 6% for the week, the S& P 500 lost 7% and the Nasdaq dropped 8%. It was the worst week for the S& P 500 and Nasdaq on a percentage basis since November 2008 and the worst week for the Dow since March 2009.

Stocks started Friday's session sharply higher after investors got a strong U.S. jobs report. But the rally had little fuel, with the major indexes turning sharply lower as fears about Europe's escalating debt problems quickly dampened any early enthusiasm.

" The jobs report was modestly reassuring," said Bruce McCain, chief market strategist with Key Private Bank. " But it's been the heightened concerns over Europe that has dominated trading today."

Italy is quickly becoming the latest domino to potentially fall in the eurozone, with many investors worrying that the eurozone's third-largest economy may be too large to save.

Young investors stay put amid turmoil

Stocks found some support after the European Central Bank said it agreed to buy Italian bonds in exchange for massive budget cuts. But traders said investors were reluctant to hold stocks going into the weekend.

" The crisis in Europe is continuing to unfold and while I suspect Europe's debt story will not have a good ending, it's not clear how many more chapters this book has," McCain said.

It's clear that fear is still dominating sentiment. Wall Street's " fear" gauge -- the VIX (VIX) -- jumped to a reading of 32.05 in late-afternoon trading. Anything above 30 indicates a heightened sense of fear.

Choppy waters ahead - StockTwits

Stocks plunged Thursday, with the Dow tumbling 512 points. It was the steepest point loss since October 2008 -- as fear about the global economy spooked investors.

All three major indexes have erased their gains for the year and now are deep into " correction" territory -- defined as a 10% drop from recent highs. And while Wall Street took a hammering the past few weeks, stocks remain well above their March 2009 lows.

World markets: European stocks sank yet again on Friday before Italy's debt deal was announced. Britain's FTSE 100 (UKX) fell 2.7%, the DAX (DAX) in Germany slipped 2.7%, while France's CAC 40 (CAC40) was down 1.3%.

Asian markets ended the session deep in the red follow Thursday's big selloff in U.S. The Shanghai Composite (SHCOMP) lost 2.2%, the Hang Seng (HSI) in Hong Kong plunged 4.3% and Japan's Nikkei (N225) lost 3.7%.

Commodities and currencies: The dollar rose against the euro, the Japanese yen and British pound.

The greenback also rose for a third straight session against the Swiss franc, following the Swiss National Bank's intervention in the currency market earlier this week.

Gold futures for December delivery gained $3 .to $1,662.60 an ounce Friday, while oil for September delivery added 25 cents to $86.88 a barrel.

Regaining faith in U.S. but not the economy

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.56% from 2.46% late Thursday.

Companies: Shares of Procter & Gamble (PG, Fortune 500) rose 2%, after the Dow component posted earnings and sales that were ahead of expectations. The company also warned that results for the current quarter would fall short of estimates.

Priceline.com (PCLN) shares jumped 9%, following the online travel site's better-than-expected earnings and a strong outlook for the rest of the year.