Wall Street staged a huge late-day rally to close well off session lows Friday but the Dow still suffered its worst weekly meltdown in its 112-year history.

The Dow has now plummeted nearly 2400 points over the past eight trading days in a panic-induced collapse fueled by the nation's most serious credit crisis since the Great Depression. 

Today's Market

The Dow Jones Industrial Average lost 128.00 points, or 1.49%, to 8451.19, the broader S&P 500 dropped 10.70 points, or 1.18%, to 899.22 and the Nasdaq Composite rose 4.39 points, or 0.27%, to 1649.51. The consumer-friendly FOX 50 fell 8.19 points, or 1.20%, to 676.97.

Friday's rollercoaster ride came on a day that saw the Dow swing by more than 1,000 points between its high and low -- an all-time record for the index. At one point, the blue-chip index picked up more than 800 points in just 30 minutes. Friday also saw very heavy volume of almost 3 billion shares on the New York Stock Exchange. 

“This was absolutely uncharted waters. This was clearly something that the bulk of people had never seen before," said Frank Davis, director of sales and trading at LEK Securities. “I think a line in the sand has been drawn. I would expect better thing next week as far as going down. Whether we go up, that’s another story."

The incredible action in the equities markets overshadowed a $9 plunge in crude oil prices, which fell to their lowest levels in a year and on global recession fears. 

The Nasdaq Composite fared much better than the broader markets, ending the day in the green for the first time in more than a week. Still, the index has seen nearly 40% of its value erased year-to-date. 

Friday's late-day rally gives some hope to those on Wall Street betting the credit crisis-caused wave of selling could soon be over. 

“Eventually it turns and the panic ends. The stock market is bipolar. Right now it’s fear driven, not greed driven,” Dan Shaffer, CEO of Shaffer Asset Management, told FOX Business.

That panic did not disappear on Friday as the VIX, a gauge of market fear, soared to its highest level in history. Those fears sent the markets to five-year lows and pushed the Dow below the 8000 level for the first time since April 2003. 

“People really need to take a deep breathe. People are scared. We’ve gone from irrational exuberance to irrational fear," NYSE trader Ted Weisberg of Seaport Securities told FOX Business. 

The carnage left in the path of the credit crisis is stunning. The Dow lost more than 18% of its value this week, suffering its worst percentage drop in its 112-year history. The blue-chip index is now off by 36% in 2008. 

Energy giants Chevron (CVX) and ExxonMobil (XOM) continued their selloffs on Friday, leading the way down on the Dow on the plunging oil prices. Alcoa (AA) and Boeing (BA) also suffered steep declines.

However, the index's financial giants saw huge percentage gains: Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and General Electric (GE) all closed sharply higher. 

Another Financial Rescue in the Works?

Friday's extremely volatile trading session came as members of the Group of Seven met in Washington to discuss the credit crisis that threatens to send the global economy into a recession. The meeting raised hopes on Wall Street that the financial leaders would unveil a new financial rescue. 

A day after reports swirled about the government injecting capital directly into banks in exchange for equity stakes, The Wall Street Journal reported that the government is considering even more extensive emergency action.

Great Britain is expected to push officials at the emergency meeting to consider a plan similar to its move to guarantee $432 billion in bank debt, the newspaper reported. However, a G7 official told Reuters a coordinated effort based on the U.K. model is unlikely.

A Treasury Department spokesperson denied to reports that it is considering a move to insure all U.S. bank deposits. The Journal reported the government was considering such a move to prevent further runs on the bank like the ones that took down Wachovia (WB) and Washington Mutual (WM). 

Global Freefall

Stock markets around the world were in freefall-mode on Friday amid the worsening credit crisis. 

The losses were headlined by Japan's Nikkei 225 index, which plummeted 881.06 points, or 9.6%, to 8276.43. The Nikkei suffered its worst one-week percentage loss since the crash of October 1987.

Europe continues to feel the pain, with London's FTSE 100 also posting its worst week since October 1987 and falling below the 4000 level for the first time since 2003. The index closed down 381.74 points, or 8.85%, to 3932.06.

Financials Still at the Forefront

Much of the attention on Wall Street remains on Morgan Stanley (MS), whose stock plunged as much as 40% to the lowest levels of the credit crisis on Friday. Rumors surrounding Morgan's $9 billion investment from Mitsubishi UFJ Financial have slammed the stock in recent days. However, Mitsubishi is not reneging on the deal and plans to close the transaction on Tuesday, sources told the Journal on Friday.

Influential financial analyst Dick Bove of Ladenburg Thalmann cut his profit outlook and price target on Morgan overnight.
“The stock market has put Morgan Stanley on death watch," Bove told FOX Business. "Clearly, the market has made the decision that Morgan can’t come through this. That of course, is what destroyed Lehman."

Meanwhile, the financial sector continues to see its landscape change at warped speed. Late Thursday Citigroup (C) abandoned its bid to acquire Wachovia (WB), leaving Wells Fargo (WFC) to proceed with its takeover of the bank. 

Shares of Wachovia soared 30% on the news. Wells Fargo's deal doesn't include any government assistance and the combined company will have $1.42 trillion in assets. 

Crude Falls Off a Cliff

Evidence of global recession fears were most obvious in the price of crude oil, which plunged below $80 a barrel to its lowest level of the year. Crude prices settled near session lows at $77.70 a barrel, down $8.89 on the day. The commodity plunged nearly as much as equities this week, ending down 17%.

Oil has been on an incredible rollercoaster ride in 2008, soaring to $147 a barrel in July before collapsing and turning negative on the year. Recession fears have forced the energy market to price in significantly lower global demand.
The greenback also put serious pressure on dollar-traded commodities like crude. The dollar soared to a 16-month high against the euro on Friday on continued fears about Europe's own credit crisis.

Corporate Movers

General Electric (GE) posted adjusted-earnings of 45 cents per share on $47.23 billion in revenue in the third quarter, matching newly revised analyst estimates. GE also said it plans to keep its dividend through 2009. GE's financial arm, GE Capital, saw its revenue increase 2% to $18.4 billion. CEO Jeff Immelt acknowledged that "GE Capital is not immune from the current environment."

General Motors (GM) told Reuters it is not considering bankruptcy protection despite its plunging stock and "unprecedented challenges" related to the financial markets and the weakened economy. They are, however, considering announcing production cuts and plant closures as early as next week, the Associated Press reported.

Goldman Sachs (GS) plunged to its worst level of the credit crisis after Moody’s warned it may need to its credit ratings, a move that would increase borrowing costs for Goldman. Moody’s cited an expectation of reduced revenue and profit due to the credit crisis and Goldman’s transformation into a bank holding company.

Macy’s (M) saw its shares dive to 52-week lows after saying it sees adjusted-earnings in the range of $1.30 to $1.50, well shy of the $1.75 analysts have forecasted. Macy’s said its same-store sales have declined by 5.8% so far in its third quarter. If weaker sales trends continue, Macy’s said same-store sales in the fall season could be down by 3% to 6%.

Data Dump

The government said the U.S. trade gap fell less than expected in August to $59.1 billion. Economists had forecasted the gap would fall from July's $61.31 billion to $58.5 billion, according to Dow Jones.

A 2% decline in exports to $164.72 billion was offset by an even greater decrease in oil imports due to lower demand and plunging crude prices.