The Closing Bell 11/27: Dubai credit worries weigh on markets

This was the sideswipe investors had feared.

The stock market is in the middle of a great rally -- albeit following a terrible dive -- but for weeks there has been a nagging fear that bad news was never far off.

The news came from Dubai, a wealthy Middle Eastern city-state that many Americans probably couldn’t find on a map. Concerns that a government-backed investment company risked defaulting on $60 billion in debt ripped through world markets and served as a reminder of how fragile the financial system remains a year after it nearly collapsed.

The Dow Jones industrial average slumped 155 points Friday before trading ended three hours early because of the Thanksgiving holiday. The Dow fell as much as 233 points before stabilizing.

The day’s broad retreat from riskier assets pushed Treasury prices higher. The dollar gained against most other major currencies and commodities tumbled.

European stocks fell sharply Thursday as U.S. markets were closed for Thanksgiving. That prompted a steep drop in the U.S. markets Friday. Europe regained some of its losses Friday.

Now the question that will dog investors over the weekend is whether the markets will shrug off a financial crisis in the Middle East or seek protection in more conservative investments. That could end a rally that has seen the Dow surge 62.5 percent since March 9.

Stocks ended well off their lows but analysts cautioned that the shortened trading day and scarcity of investors meant the real test for the markets will come next week as traders return from long weekends.

The day’s gyrations made clear that investors who might have been buying up stock in the past eight months remain on edge about faults in the financial system and the economy.

The latest trouble on Wall Street comes as the U.S. kicks off the unofficial start to the holiday shopping season. Investors will be tracking news from retailers for insights into how much consumers will spend in the coming month. Consumer spending is the biggest driver of the U.S. economy.

The Dow fell 154.48, or 1.5 percent, to 10,309.92, after being down as much as 233 points. It was the Dow’s biggest drop since Oct. 30.

The broader Standard & Poor’s 500 index fell 19.14, or 1.7 percent, to 1,091.49, and the Nasdaq composite index fell 37.61, or 1.7 percent, to 2,138.44.

For the week, the Dow slipped 0.1 percent, its fourth drop in six weeks. The S&P 500 index rose less than 0.1 percent and the Nasdaq fell 0.4 percent. Stocks are still up sharply for the month and the year.

The KansasCity.com index of 145 regional companies showed a drop of 9.52 Friday, or 1.51 percent, to 620.53.

Among Kansas City area companies of interest:

I Cerner Corp. closed at $75.380, down $1.72.

I Capitol Federal Financial closed at $29.19, down 37 cents.

I Commerce Bancshares Inc. closed at $38.59, down 72 cents.

I DST Systems Inc. closed at $42.06, down 58 cents.

I Garmin Ltd. closed at $31.10, down 7 cents.

I Great Plains Energy closed at $17.85, down 25 cents.

I H&R Block Inc. closed at $20.39, down 10 cents.

I Kansas City Southern closed at $28.36, down 64 cents.

I Sprint Nextel Corp. closed at $3.75, down 9 cents.

I UMB Financial Corp. closed at $39, down 85 cents.

I Waddell & Reed Financial Corp. closed at $28.43, down 98 cents.

I YRC Worldwide Inc. closed at $1.12, down 3 cents.

The Closing Bell is compiled from staff and wire reports.