Second straight plunge
After a 311-point sell-off Thursday, the Dow Jones average didn't fare much better Friday, dropping 208.1 points, capping the index's worst week since 2002.
Investors were unable to put aside concerns about a weakening housing market and tightening credit that could increase borrowing costs for consumers and companies.
The Standard & Poor's 500 index also had its worst week in five years, falling 4.9 percent.
Dominoes fall globally
On the heels of U.S. markets' tumble Thursday, world markets were hit hard Friday, with most Asian markets dropping.
Japan's Nikkei stock average closed down 2.36 percent, while the often-volatile Shanghai composite index edged down.
Major European indexes also fell moderately, including Germany's DAX index, Britain's FTSE 100 and France's CAC-40, all of which dropped Friday by less than 1 percent.
Domestic growth near?
One bright spot on the economic front Friday was the Commerce Department's report on gross domestic product for the second quarter of the year, which posted a better-than-expected 3.4 percent gain, indicating the drag from the housing sector lessened.
But the report also raised investors' concerns that the Federal Reserve, ever vigilant about inflation, might put off an interest rate cut or even raise rates.
In its worst week in five years, the Dow Jones industrials average lost 585 points, or 4.23 percent. It has lost 758 points from the all-time high it set last week.