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Wall Street was engulfed by the biggest wave of selling in months on Friday as chaos in Egypt and tumbling tech stocks like Amazon.com rocked the previously red-hot markets.

Today's Markets

The Dow Jones Industrial Average fell 166.13 points, or 1.39%, to 11823.70, the Standard & Poor's 500 slid 23.20 points, or 1.79%, to 1276.34 and the Nasdaq Composite lost 68.19 points, or 2.47%, to 2687.09. The FOX 50 declined 16.40 points, or 1.77%, to 911.56.

The market tumble ranked as the Nasdaq's worst day since August, backed the S&P 500 away from the psychologically-important 1300 level and prevented the blue chips from posting their first nine-week rally since 1995.

Aside from geopolitical concerns and big earnings disappointments, traders were scratching their heads over a glitch that caused the Nasdaq to be stuck in neutral for the first hour of trading, briefly bringing back memories of last year’s “Flash Crash.”

The instability in Egypt, one of the Middle East’s largest economies and a key U.S. ally, had a dramatic impact on the financial markets: crude oil spiked 4%, gold posted its biggest gain since November, cash fled to the relative safety of the U.S. dollar and Egypt’s market plummeted to a two-year low.

While the Egyptian situation was alarming, many blamed the steep selloff on disappointment over fourth-quarter results and guidance from Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Ford (NYSE:F) and others.

“When you have a market priced for perfection and they start to disappoint, you get a reaction like this,” said Joe Saluzzi, co-head of trading at Themis Trading.

Almost all of the Dow's 30 stocks landed in the red, led by Microsoft (NASDAQ:MSFT) and Home Depot (NYSE:HD). The index's only advancers were DuPont (NYSE:DD) and Procter & Gamble (NYSE:PG). 

Slammed by Amazon.com (NASDAQ:AMZN) and SanDisk (NASDAQ:SNDK), the Nasdaq suffered its worst day since August 11. Selling spilled into other tech stocks like Adobe (NASDAQ:ADBE) and Applied Materials (NASDAQ:AMAT). 

Underscoring the jitters on Wall Street, the VIX, or the markets' so-called "fear gauge," spiked 24.09% -- its biggest rise since May -- to the highest levels since early December. 

“The tone and the trend is still positive,” said Peter Kenny, managing director at Knight Capital Group. “These pullbacks are more opportunities to add to the trend than they are opportunities to just dump the market. That psychology just isn’t present.”

Earnings Misses, Egypt Riots Slam Stocks

The protests rocking Egypt caused alarm on Wall Street as traders pondered the potential economic impact, especially on crude oil, and wondered if the unrest could spill over elsewhere in the turbulent region. The price to insure Egypt's debt soared amid the violence and Fitch put a negative outlook on the country's credit rating. 

“It’s a highly combustible environment there. When there is such unrest in one of the countries that has been a bridge for peace, it doesn’t bode well. There’s a very uneasy feeling,” said Jason Weisberg, a NYSE trader and senior vice president at Seaport Securities.

Crude oil, which relies on Egypt's Suez Canal for transportation out of the region, posted its steepest surge since September 2009, soaring $3.70 a barrel, or 4.32%, to $89.34. Gold also benefited from the flight to safety, jumping $17.70 a troy ounce, or 136%, to $1,337.50.  

In another sign of cash fleeing from risky assets, the U.S. dollar rallied against rivals. The euro slid 0.84% to $1.3614.

At the same time, Wall Street reeled from key earnings misses from major companies, especially in the tech world

Amazon.com slid 7% as the online retailer's first-quarter guidance and fourth-quarter sales growth of 36% to $12.95 billion failed to live up to the hype. Software titan Microsoft slumped 4% as its EPS and sales beats were overshadowed by weaker-than-expected Windows sales amid weak PC sales. Slammed by tighter margins, flash memory supplier SanDisk tumbled 9%.

Meanwhile, Ford plunged over 13% after posting a non-GAAP profit of 30 cents a share, badly missing the Street's view of 48 cents a share. 

Nasdaq Glitch Probed

Nasdaq reacted to the outage impacting prices on its indexes by switching to back-up calculators by 10:30 a.m. ET. It's not clear what caused the glitch, but Nasdaq said it was investigating.

While some traders shrugged it off, it's possible the Nasdaq glitch could renew concerns on Wall Street about the reliability of the trading systems used on the major exchanged. Few have forgotten last May's "Flash Crash," which sparked a 1,000-point plunge on the Dow before the markets rebounded -- weighing heavily on investor psychology.

“It’s clearly not going to increase investor confidence,” said Michael James, managing director of equity trading at Wedbush Securities. 

Friday's economic headlines were largely overshadowed. The Commerce Department said gross domestic product grew in the fourth quarter at a 3.2% pace -- the fastest pace since the Great Recession began at the end of 2007. While it trailed forecasts for 3.5% from economists, the fourth quarter built on GDP gains of 2.6% and 1.7% in the prior two quarters. Consumer spending, which accounts for 70% of the U.S. economy, jumped 4.4% -- the best pace since 2006. 

Also, the University of Michigan said its consumer sentiment index rose to a seven-month high 74.2 at the end of January, up from 72.7 at the beginning of the month and above forecasts from economists for 73.2. 

Corporate Movers

Sara Lee (NYSE:SLE) unveiled plans to divide itself into two public companies after failing to reach a deal with Brazil's JBS or a private-equity group. The company said the deal triggers a $3 special dividend. 

Honeywell (NYSE:HON) doubled its EPS on a GAAP basis and posted an adjusted-profit of 87 cents a share, meeting estimates. 

Chevron (NYSE:CVX) beat the Street with a 72% surge in fourth-quarter profits to $2.64 on a 9% jump in revenue to $51.9 billion.

Vodafone (NYSE:VOD) CEO Vittoria Colao said it has shut down mobile service at Egypt’s request amid violent protests in Cairo, The Wall Street Journal reported. 

Global Markets

The U.K.'s FTSE 100 slumped 1.40% to 5881.37, Germany's DAX declined 0.74% to 7102.80 and France's CAC 40 tumbled 1.41% to 4002.32.

In Asia, Japan's Nikkei 225 slid 1.13% to 10360.30, Hong Kong's Hang Seng fell 0.68% to 23617 and China's Shanghai Composite gained 0.13% to 2752.75.