Updated at 10:47 a.m. ET
Stocks were trading more than 1% lower after better than expected economic numbers from the U.S. did little to ease intense worries about global economic growth.
The Dow Jones Industrial Average ($INDU) was down 101.11 points, or 0.9%, at 11,052. The S&P 500 ($INX) was down 15.3 points, or 1.3%, at 1,145, and the Nasdaq ($COMPX) was down 33.1 points, or 1.3%, at 2,447.
The Dow bounced from its early low after the Chicago Purchasing Managers Index for August rose to 60.4 in September, topping expectations for a third straight decline to 54 and well ahead of August's reading of 56.5. The report was a welcome surprise given that August saw the lowest level since November 2009.
Also setting the tone this morning was a slightly better read on consumer sentiment. The University of Michigan reported that consumer sentiment rose to 59.4 in September, following a prior reading of 57.8.
A raft of negative data from abroad weighed on investors. A gauge of manufacturing in China declined for a third month in September, according to a report from HSBC Holdings and Markit Economics. Retail sales in Germany, Europe's largest economy, came in below expectations, dropping 2.9% in July. The reading marked the biggest drop in more than four years and underscored a possible slowdown in the global economy.
Eurozone inflation jumped 3% in September, exceeding the European Central Bank's target of below 2%, as well as economists' expectations for 2.5%. The latest reading on inflation cooled speculation that the ECB may take monetary easing measures in addition to lowering interest rates.
Before the open, personal income slipped 0.1% and spending increased 0.2% in August, according to the Commerce Department. Economists were looking for slight gains to income and spending of 0.1% and 0.2%. In July, spending rose a revised 0.7%, while income decreased a revised 0.2%.
In Europe, stocks were headed to close out the worst quarter since 2008. London's FTSE was falling 2.2%, while Germany's DAX was shedding 2.6%. Asian markets closed lower, with Japan's Nikkei down 0.01% and Hong Kong's Hang Seng dropping 2.32%.
On the upside, Europe is getting closer to passing a proposal to expand the eurozone bailout fund. The most recent countries to approve the plan were Germany and Estonia on Thursday. However, the possibility of allowing the fund to borrow and buy bonds to inject capital into the European financial system is still in debate.
"The drama in Europe continues to play out like a dreary soap opera with daily twists and turns," according to investment firm D.A. Davidson & Co. "Traders have been whipsawed by highly volatile stock market price action as unexpected rumors or reports on the European situation continue to hit the tape."
Chinese companies with U.S. listings are expected to face another volatile session after Reuters reported Thursday that the U.S. Justice Department and Securities and Exchange Commission are digging deeper into the companies' accounting practices.
Americans' personal income declined 0.1% in August, while spending rose 0.2%, according to a report from the Bureau of Ecomomic Analysis. Economists had expected that incomes would rise 0.2%. In July, spending rose 0.8% and incomes rose 0.3%.
In corporate news, chip-maker Micron Technology (MU) posted a surprise quarterly loss on flat sales and declining margins. The company said it lost $135 million, or 14 cents a share, for the fourth quarter on revenue of $2.14 billion, down from a year-ago profit of $342 million, or 32 cents a share, on revenue of $2.49 billion. Micron also warned investors about the coming jury decision in its antitrust case with Rambus (RMBS), saying it can't reasonably estimate the range of possible losses from the suit. Shares were plunging 11.1% to $5.22 Friday.
Industrial and commercial products company Ingersoll-Rand (IR) has lowered its third-quarter earnings projections to 77 to 80 cents a share from 85 to 95 cents. Shares were falling 16.3% to $26.74.
The benchmark 10-year Treasury was gaining 18/32, diluting the yield to 1.94%. The euro was dropping, while the dollar was strengthening against a basket of currencies, with the dollar index rising 0.774%.
Gold for December delivery was climbing $6.10 to $1,623.40.
The November crude oil contract was slipping by $1.29 to $80.99 a barrel.
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