U.S. Stocks Retreat From Opening Plummet, Dow Off 00 Points

NEW YORK (MarketWatch) -- U.S. stocks plunged sharply at the start, with the Dow Jones Industrial Average dumping more than 400 points before erasing a portion of its retreat, after a global sell-off in equities reignited worries over prospects for a worldwide recession.

"We're in massive panic mode right now," said Peter Cardillo, market economist at Avalon Partners. "When madness enters the market arena, it's generally followed by capitulation."

After dropping 420 points, the Dow Jones Industrial Average trimmed its decline, recently off 301.71 points, or 3.8%, to 8,389.54.

The S&P 500 dropped 33.13 points, or 3.6%, to 874.98 and the Nasdaq Composite fell 51.05 points, or 3.2%, to 1,553.23.

Before the opening bell, stock futures fell so much they reached pre-specified limits, freezing trade in the contracts.

Friday also brought word of a deal in which PNC Financial Services Group will buy troubled regional bank National City Corp. for about $5.5 billion.

Financial-sector shares dropped, including those of PNC and National City, as the global storm that started in Asia overnight spread through Europe. .

Volatility marked trading in other financial markets as well.

The dollar fell to a more than 13-year low against the Japanese yen .

Oil futures fell $4.44 to $63.44 a barrel as OPEC cut production by 1.5 million barrels of oil a day.

Gold futures fell for a fourth day, putting the precious metal on track for its biggest weekly loss in at least 28 years. .

Thursday's session for U.S. stocks was erratic but generally positive, with the Dow Jones Industrial Average closing 172 points higher and the S&P 500 rising 11 points, though the Nasdaq Composite slipped 11 points.

But that didn't feed through to Asia, where the Nikkei 225 tumbled 9.6% in Tokyo, as Japanese traders got their first chance to react to Sony's profit warning, and the Kospi equities benchmark plunged 10.6% in South Korea. European stocks also were crushed, with the Dow Jones Stoxx 600 losing 7.4%. .

By Kate Gibson