NEW YORK -- The Dow Jones industrials slid 269 points Friday before erasing two-thirds of its losses by the end of the second-busiest trading session ever.
The drop was tied to escalating economic troubles in Asia and continued worries about how they will affect domestic corporate earnings. But many saw the drop as exaggerated and a steady stream of buying interest into the afternoon saved the Dow from its worst drop since the 554-point loss on Oct. 27.
Dow stocks General Electric and Chevron both announced plans to buy billions of dollars worth of their own stock, giving the market some encouragement.
The Dow average ended down 90.21 at 7,756.29, extending Wednesday's 110-point decline and ending lower for the third consecutive session. But in a sign of health for technology stocks, the Nasdaq Stock Market finished the day with a slight gain.
Volume on the New York Stock Exchange was the second-highest in history, with 782.03 million shares changing hands, the highest level since it topped 1 billion shares Oct. 28.
"The question is, will the problems in Southeast Asia impact the U.S. in 1998," said Hildegard Zagorski, an analyst at Prudential Securities. "Lots of economists say they will slow down growth and affect earnings. You've got a very cautious market here."
The market fell to its low of the day about 90 minutes after the opening on Wall Street after another major corporate bankruptcy in Japan precipitated a 5-percent drop in the Nikkei index that spread to Europe before reaching the United States.
The rout in Japan resulted from a bankruptcy filing by Toshoku Ltd., a major Japanese food trading company, which cited tighter lending policies among Japan's troubled banks.
Including gains on Monday and Tuesday, the Dow finished the week down 82 points and it remains about 500 points below its all-time closing high of 8,259.31 reached Aug. 6. But it is still up 20 percent for the year.
Investors are concerned, however, that the strong gains on Wall Street over the last three years may be halted by the economic difficulties in Asia, which could diminish U.S. exports to Asia and hurt domestic corporate profits.
"The market is priced for perfection, and it's not going to get it," said Barton Biggs, global investment strategist at Morgan Stanley, Dean Witter Discover. Mr. Biggs, who has been warning of a market drop recently, says big-name company profits could fall as much as 10 percent next year.
The Asian troubles are also putting pressure on Asian currencies, which investors fear could result in the flooding of U.S. markets with cheap imports. That could make it difficult for domestic companies to raise prices, squeezing profits.