The Dow Jones Industrial Average closed down a sharp 1.29 percent at 13,167.20, as investors remained concerned about bank losses and wider economic uncertainty largely triggered by the US housing slump.
The Nasdaq composite shed 2.32 percent to 2,574.46 and the Standard & Poor's 500 broad-market index finished down 1.50 percent at 1,445.90.
"Wall Street remains concerned over the possibility of more huge writeoffs from global financial companies and the ramification those write-offs could have on the banks' ability to finance the global economic expansion," said Fred Dickson, strategist at DA Davidson & Co.
"The inflation data delivered during the week suggests that more investors will be thinking that stagflation, rather than reaccelerating economic growth, could be the operative economic scenario during 2008. Right now, it is hard to find a sliver lining on the floor of the global stock exchan