The Dow lost 119.74, or 1.04 percent, to 11,380.99 on Friday. That came one day after the Dow sank 142 points in Thursday's session, its biggest single-day drop since falling 213 points on Jan. 19.
Broader stock indicators also retreated. The Standard & Poor's 500 index fell 14.68, or 1.12 percent, to 1,291.24, and the Nasdaq composite index dropped 28.92, or 1.27 percent, to 2,243.78.
A rebound in prices for imported goods further rattled investors already worried about interest rates. Although import prices were flat excluding oil, that did little to soothe concerns about energy costs lifting prices elsewhere.
Plunging consumer confidence also reinforced beliefs that high gas prices at the pumps could choke consumer spending. Meanwhile, Wall Street weighed the importance of an unexpected decline in the trade deficit and cooling oil prices.
Friday's decline in equity markets built on steep losses the previous day, when surging commodities prices compounded anxiety that the Federal Reserve could continue its two-year streak of interest rate hikes. And next week's reports on wholesale and consumer prices could prove troublesome for the inflation picture.
"With commodities prices reaching new highs, people are saying maybe global growth is stronger than anticipated," said Brian Gendreau, investment strategist for ING Investment Management. "I think that ... has put more Fed tightening in the back of people's minds. The market hates the idea of open-ended increases."
Bonds continued sliding, with the yield on the 10-year Treasury note rising to 5.19 percent from 5.16 percent late Thursday. The interest rate debate also weighed on the dollar, which fell further against the yen. Gold prices pulled back from fresh 25-year highs.
Lowered forecasts for global oil demand from the International Energy Agency eased pressure on the energy market. A barrel of light crude lost $1.22 to settle at $72.10 on the New York Mercantile Exchange.
The major indexes closed substantially lower for the week following two days of frenzied selling, with troubling outlooks from Dell Inc. and Cisco Systems Inc. propelling the Nasdaq's decline. For the week, the Dow skidded 1.7 percent and the S&P 500 slumped 2.61 percent; the Nasdaq plunged 4.22 percent, erasing much of its gains so far this year.
Volatile trading is expected to continue next week as investors draw clues about the economy and inflation from data on homebuilding and wholesale and consumer prices.
"I certainly get the sense that it's going to be hard to rally," said Art Hogan, chief market analyst for Jefferies & Co. "We're going to take it for what it is and come back next week fighting. There will be plenty for us to think about in terms of the pace of economic growth."
In economic news, the Labor Department said prices for goods shipped to the United States swelled 2.1 percent last month after declining 0.2 percent the previous month, but import prices without energy were unchanged. Export prices rose 0.6 after gaining 0.2 percent in March.
Elsewhere, the Commerce Department said the trade deficit narrowed by $3.6 billion to $62 billion, while economists were predicting a $1.4 billion increase.
The University of Michigan's consumer-sentiment index for May plummeted 8.4 points to 79. Economists were looking for the index to drop just 1.4 points to 86.
Expedia Inc. plunged $5.15 to $14.51 after its first-quarter profit declined and fell far short of Wall Street expectations. The online travel company said higher costs outpaced a modest jump in revenue.
Electronics retailer Best Buy Co. is paying $180 million to acquire a majority stake in Jiangsu Five Star Appliance Co., China's fourth-largest appliance and electronics seller. Best Buy tumbled $1.22 to $52.60.
General Motors Corp. was one of a few gainers among the Dow Jones industrials, adding 24 cents to $26.05 after KeyBanc Capital Markets upgraded the automaker to "buy" on beliefs that negotiations with its union will be successful.
Declining issues led advancers by more than 4 to 1 on the New York Stock Exchange, where volume of 1.44 billion shares topped the 1.39 billion shares changing hands at the same point Thursday.
The Russell 2000 index of smaller companies declined 15.07, or 1.99 percent, to 742.40.