Meanwhile Wall Street was coping with the shock waves of a suspected $50 billion fraud that may rank as one of the biggest ever, Japan weighed a currency intervention, OPEC debated production cuts and Europe agreed to a 200 billion euro ($268 billion) stimulus package.
"This is ugly and getting uglier," Peter Kenny, managing director at Knight Equity Management in New Jersey, said on Friday.
"Pick your poison. Do you want to talk about autos, or some of the macroeconomic data we've had coming out or do you want to talk about Madoff? If there's something positive here, share it with me. I see nothing here that is going to give anyone any reason to buy the market."
Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday. The former chairman of the Nasdaq Stock Market also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.
The U.S. Senate late on Thursday failed to enact a $14 billion auto bailout previously approved by the House of Representatives.
That prompted concerns that one of the last bastions of the U.S. manufacturing base could be forced into bankruptcy or collapse, jeopardizing millions of jobs and having repercussions worldwide.
General Motors Corp and Chrysler LLC had sought billions of dollars in immediate aid to avert collapse, while Ford Motor Co wanted a hefty line of credit.
'Bad Christmas'
"It's going to be a very, very bad Christmas for a lot of people," said U.S. Senate Majority Leader Harry Reid, a Democrat who favored the bailout. "I dread looking at Wall Street tomorrow. It's not going to be a pretty sight."
The Bush administration warned that the U.S. economy could not withstand such a collapse and said it might be willing to provide emergency funding to rescue the industry, possibly from the $700 billion financial bailout fund known as TARP.
That prevented a precipitous drop on Wall Street. The Dow was down 0.9 percent and the S&P 500 was off 0.7 percent.
Tokyo's Nikkei average fell 5.6 percent after Japan expanded a fiscal stimulus plan and bolstered a war chest for bank rescues to $131 billion.
But Tokyo kept markets guessing on whether it would intervene to stop a surging yen from pushing the economy deeper into recession.
European stocks were down 2.6 percent after European Union leaders sealed the 200 billion-euro stimulus package, which had exposed deep differences between Britain and Germany.
The euro zone clearly needs a boost -- data on Friday showed industrial output dived 5.3 percent year-on-year in October.
The United States was then hit by additional troubling indicators when retail sales fell for the fifth straight month and producer prices dipped 2.2 percent, raising the specter of deflation.
Even China has been unable to avoid damage.
Beijing launched a 4 trillion-yuan ($586 billion) stimulus plan on Nov. 9 and followed up on Wednesday with a pledge after a strategy meeting to ramp up public spending and cut taxes.
Senior officials were confident of hitting 8 percent growth in 2009 -- the rate deemed necessary to create enough jobs for the millions joining the workforce each year.
Others disagree. The World Bank forecasts 7.5 percent growth next year; Goldman Sachs expects a rate of just 6.0 percent.
The good news for consumers was falling oil and commodities prices.
OPEC appeared likely to agree to another big production cut when it meets in Algeria next week in the face of shrinking fuel demand and battered oil prices. The issue was how deep that cut should be.
