"GE never surprises us, and they had the whole month of March to let us know. All they had to say is, for the love of God, business is actually slow!" said Art Hogan, chief market strategist at Jefferies & Co.
The Dow Jones Industrial Average shed 256.56 points, or 2%, to end at 12,325.42, pulling the blue chips down 2.2% on the week.
Of the Dow's 30 components, all but one ended in the red. The decline was fronted by General Electric , with its shares suffering their worst one-day percentage drop since October 1987, losing 12.8% to end at $32.05.
The industry bellwether reported a 6% decline in first-quarter net profit, largely over trouble in its financial-services businesses. .
"The lowering of industrial firms' 2008 expectations is in line with the credit troubles we have seen over the last six to eight months, and fuel the debate on how deep a slowdown we might be facing," said David Ader, U.S. government bond strategist at RBS Greenwich Capital.
The S&P 500 fell 27.72 points, or 2%, to 1,332.83, translating into a 2.7% decline on the week, while the Nasdaq Composite suffered the biggest drop, sinking 61.46 points, or 2.6%, to 2,290.24, giving it a weekly loss of 3.4%.
Information technology led S&P sector declines, off 2.7%, followed by industrials, down 2.2%.
"GE is the S&P 500 in and of itself -- what makes up the S&P? Financials, health care, technology, GE has got all of that," said Hogan.
Volume on the New York Stock Exchange topped 3.6 billion shares, with decliners outpacing advancing stocks more than 3 to 1. On the Nasdaq, more than 1.8 billion shares were exchanged, and declining issues outnumbered advancers roughly 4 to 1.
Weak dollar fuels import prices
Early economic data did little to offset the market's bearish tone, with the Labor Department reporting that a surge in prices for imported petroleum pushed the price of imports to their biggest monthly percentage increase since November 2007. .
"The surge in import prices is occurring because of weakness in the U.S. dollar and because of worldwide inflation pressures," said Tony Crescenzi, bond market strategist for Miller Tabak & Co.
A later report helped cement the session's bearish tone, with the consumer sentiment index compiled by the University of Michigan/Reuters sliding to its lowest level since March 1982. .
On the New York Mercantile Exchange, crude-oil futures gained, with the benchmark contract up 3 cents to close at $110.14 a barrel. .
Gold futures also fell, with the contract for June delivery falling $4.80 to end at $927 an ounce. .
The dollar extended losses against the yen, losing ground against the euro as well. The dollar index was at 71.83, down from 72.148 in late North American trading Thursday.
On the corporate front, Frontier Airlines Holdings Inc. filed for Chapter 11 bankruptcy protection, joining a list of carriers making the move amid rising fuel prices and a slowing economy. .
Shares of Frontier plunged 69.4%.
European shares weakened as General Electric's earnings raised concerns for the health of its rivals overseas. .
In Asia, Japanese shares soared, led by financials. .
By Kate Gibson