NEW YORK – Stocks slid Friday, completing the biggest weekly decline in more than a year, amid concerns that Europe’s debt crisis is worsening and weakening confidence in financial trading mechanisms.

“It’s a confidence crisis,” said Quincy Krosby, chief market strategist for Newark, N.J.-based Prudential Financial Inc. “You’ve got yourself in a vortex of negativity in Europe. In the U.S., the investigation of yesterday’s trading is definitely an overhang. It’s a very precarious scenario. The market is waiting for a viable solution.”

The Standard & Poor’s 500 Index, which sank 3.2 percent Thursday for its biggest loss in a year, tumbled another 1.5 percent to 1,110.88 on Friday. The Dow fell 139.89 points, or 1.3 percent, to 10,380.43 after tumbling as much as 279 points. The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 25 percent to 40.95, the highest level in a year. The VIX surged 86 percent this week, the most in its 20-year history.

American Express, Hewlett-Packard and Cisco Systems lost more than 3 percent to lead declines in the Dow. All 10 industry groups in the Standard & Poor’s 500 Index fell, and benchmark gauges of U.S. equities erased their gains for 2010.

After Thursday’s sell-off, regulators plan to examine whether securities professionals triggered the plunge or exploited the turmoil to profit illegally, two people with direct knowledge of the matter said.

One Securities and Exchange Commission memo, according to people who saw it, discusses a theory raised by NYSE Euronext spokesman Ray Pellecchia, who said sudden price moves in multiple stocks reached so-called liquidity replenishment points.

That prompted the exchange to slow trading in those shares as it tried to ensure an orderly market. Such incidences allow other exchanges to ignore NYSE price quotes.

Trades sent to electronic networks then fueled the drop, Larry Leibowitz, chief operating officer of NYSE Euronext, said. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the decline snowballed as orders went to venues lacking liquidity to match them, he said in an interview Thursday.

Nasdaq OMX Group Inc. said it will cancel trades of 296 securities that fell or rose more than 60 percent from their prices at 2:40 p.m. New York time Thursday, just before U.S. equities plummeted.

The S&P 500 lost 6.4 percent this week and the Dow tumbled 5.7 percent, the biggest declines for both since early March 2009. The S&P 500 is still up 64 percent from its 12-year low that month.

The biggest U.S. fund managers say the bull market in stocks should weather Europe’s widening sovereign debt crisis even as it spurs the largest surge in volatility since the collapse of Lehman Brothers.

The Labor Department reported Friday that employment increased in April by the most in four years, although the unemployment rate unexpectedly rose as thousands of people entered the labor force.

Payrolls jumped 290,000 last month, more than the median estimate of economists surveyed by Bloomberg News, after a revised 230,000 increase in March, the Labor Department said. The jobless rate rose to 9.9 percent last month from 9.7 percent.

“The bull market is intact,” said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. “There’s economic momentum now. Volatility is going to stay elevated for a while, but there’s a chance we see new highs for stocks before the year is out.”

While equities may post more losses as countries from Greece to Spain struggle to cut deficits, managers at Birinyi Associates and First Citizens BancShares say declines are a buying opportunity.

The retreat has made American stocks more attractive by reducing valuations as the economy and corporate profits recover, said Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co.

Technology shares had the biggest decline in the S&P 500 among 10 industries, dropping 2.3 percent.

Apple fell 4.2 percent to $235.86. Nokia said it sued the company in Wisconsin for infringement of Nokia patents processed and transmitted by Hugin AS.

Leap Wireless International Inc. slumped 15 percent to $14.26. Citigroup cut its rating on the pay-as-you-go mobile-phone carrier to “hold” from “buy,” and Credit Suisse Group advised investors to bet against the stock.

Bigger rival MetroPCS Communications Inc. dropped 11 percent to $7.15.

AES Corp. plunged 7.7 percent to $9.89. The U.S. power producer with operations in more than two dozen countries lowered its 2010 forecast, projecting earnings excluding some items of 95 cents a share at most. That trailed the average analyst estimate of $1.02.

“Volatility is going to be with us,” said Art Hogan, chief market analyst at New York-based Jefferies & Co.


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