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 The Dow Jones industrial averaged closed down 45 points but had fallen as much as 160 points. Shares of three Dow stocks with extensive business overseas
- Alcoa, Boeing and General Electric - all fell more than 1 percent.
Regulators in China are trying to keep the nation's rapid economic growth from getting out of hand. But investors worry that a slowdown in China could disrupt a U.S. recovery by hurting exports and profits of companies that do business there.
Just the whiff of a slowdown in China was enough to batter shares of industrial companies and materials producers. That's because a slower-growing Chinese economy would mean weaker demand for industrial goods like metals and jet engines. Commodities prices also fell, which hurt companies that rely on oil, copper and other basic materials to make money.
Richard C. Kang, chief investment officer and director of research at Emerging Global Advisors in Ridgewood, N.J., said big U.S. companies now look to developing markets like China for a growing part of their sales so the strength of foreign economies is crucial.
"Every investor always thought 'China builds, Wal-Mart sells. End of story,'" Kang said. "If you look at the U.S. and who they export to, China is very quickly going up that list."
Stocks ended mixed but the Dow and other major indexes posted gains for the week, their first after four losing weeks.
The surprise announcement out of China came a day after a tame inflation report there raised hopes that the country wouldn't have to do more to put the brakes on its supercharged economy. The market pulled off of its lows as traders saw merit in China's policy of keeping its growth under control.
China's move to curtail lending was only the latest development to rattle traders. The stock market has fallen from 15-month highs in the past four weeks as investors recoil from policy fights in Washington and from economic problems popping up in Europe, such as Greece's debt crisis. The Standard & Poor's 500 index is down 6.5 percent from its recent peak Jan. 19.
A similar action to curb bank lending nearly a month ago in China spooked the market and helped start a slide that has brought major indexes down for four straight weeks.
Concerns about debt problems in Greece as well as Portugal, Ireland and Spain hurt stocks during the week. On Thursday, European Union leaders pledged to provide Greece with support. There has been worry that debt problems there could spread and destabilize Europe's common currency, the euro.
The Dow fell 45.05, or 0.4 percent, to 10,099.14. The Standard & Poor's 500 index dropped 2.96, or 0.3 percent, to 1,075.51, while the Nasdaq composite index rose 6.12, or 0.3 percent, to 2,183.53.
For the week, the Dow and the S&P 500 index each rose 0.9 percent while the Nasdaq jumped 2 percent.
U.S. markets are closed Monday for President's Day.
The mixed trading Friday followed steep gains Thursday on a promise by European leaders to help Greece. However, there are few details about any rescue. EU leaders are scheduled to meet again next week.
Barbara Marcin, manager at the Gabelli Blue Chip Value Fund in Rye, N.Y., said investors have been skittish in the past month because the financial crisis made clear that problems in one market can leap to others. In 2007, faltering home loans in the U.S. began hurting investors overseas who held the mortgages.
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 "Things you thought were unrelated can suddenly become related," she said.
With investors pulling out of riskier assets like stocks and commodities, safe-haven investments like Treasurys and the dollar rose.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.70 percent from 3.73 percent late Thursday.
The stronger dollar hurt commodity prices, which are priced in dollars and become more expensive for foreign buyers when the dollar rises.
Crude oil fell $1.15 to $74.13 per barrel on the New York Mercantile Exchange after four days of gains.
The concern about China mainly overshadowed a Commerce Department report that retail sales grew more than expected in January. Retail sales rose 0.5 percent last month, more than the 0.3 percent increase expected by economists polled by Thomson Reuters. The report was the best showing since November.
Some of the swings in stocks Friday came as Warren Buffett's Berkshire Hathaway Inc. was added to the S&P 500 index. Funds that mirror the composition of the index had to buy the stock, which was added to the index at the end of the day.
Alcoa Inc. fell 30 cents, or 2.2 percent, to $13.28, while Boeing Co. dropped 94 cents, or 1.6 percent, to $59.65. General Electric Co. slipped 22 cents, or 1.4 percent, to $15.55.
Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where consolidaed volume came to 4.5 billion shares compared with 4.4 billion Thursday.
The Russell 2000 index of smaller companies rose 5.26, or 0.9 percent, to 610.72.
Overseas, Britain's FTSE 100 fell 0.4 percent, Germany's DAX index lost 0.1 percent, and France's CAC-40 fell 0.5 percent. Japan's Nikkei stock average rose 1.3 percent.
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The Dow Jones industrial average closed the week up 86.91, or 0.9 percent, at 10,099.14. The Standard & Poor's 500 index rose 9.32, or 0.9 percent, to 1,075.51. The Nasdaq composite index rose 42.41, or 2 percent, to 2,183.53.
The Russell 2000 index, which tracks the performance of small company stocks, rose 17.74, or 3 percent, for the week to 610.72.
The Dow Jones U.S. Total Stock Market Index - which measures nearly all U.S.-based companies
- ended at 11,043.50, up 143.21, or 1.3 percent.
[Associated
Press; By STEPHEN BERNARD and TIM PARADIS]
Copyright 2010 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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