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The Commerce Department said Friday that the U.S. economy contracted at a staggering 6.2 percent pace at the end of 2008, much worse than the 5.4 percent decline economists expected.
Financial stocks dived Friday after the U.S. government said it will take a large stake in Citigroup's common shares.
Citigroup said early Friday that it reached a deal in which the U.S. government and private investors including the government of Singapore and Saudi Arabian Prince Alwaleed Bin Talal will convert preferred stock in the struggling bank to common shares. The company will suspend dividend payments on its preferred stock.
Shares of Citi tumbled 39.02 percent to 1.50 dollars after falling as much as 50 percent in the early trading. Bank of America was down 25.75 percent to 3.95 dollars.
Healthcare and drug companies, such as Merck & Co and Johnson &Johnson Inc, fell for a second day on worries that President Barack Obama's budget proposal will strangle profits.
General Electronics, one of the largest U.S. companies, said Friday it will pay shareholders a 10-cents-per-share dividend beginning in the third quarter, down from the company's original plan of 31 cents. Shares of GE declined 6.48 percent to 8.51 dollars.
The Dow Jones industrial average fell 119.15 points, or 1.66 percent, to 7,062.93. The Standard & Poor's 500 Index lost 17.74 points, or 2.36 percent, to 735.09. Both indexes ended at their lowest level since April 1997.
The Nasdaq composite index was down 13.63 points, or 0.98 percent, at 1,377.84.