Global Selloff Spares No Asset

While weakness within the banking industry came as no surprise, reports only stoked fears of a continuation of stress in the financial sector. That stress has eliminated or necessitated the bailout or fire sale of several top firms this year, including Bear Stearns, Lehman Brothers, AIG (AIG Quote), Fannie Mae (FNM Quote), Freddie Mac (FRE Quote), Merrill Lynch (MER Quote), Washington Mutual and Wachovia (WB Quote).

Other reports with unexpected downside, like Yahoo's (YHOO Quote) 64% profit plunge and major job cuts, or word that Goldman Sachs (GS Quote) would slash 10% of its workforce, added fuel in the days leading up to the end-of-week conflagration.

The list of calamities Friday is long. The Dow Jones Industrial Average fell as much as 500 points, before closing down 215. The dollar soared to multi-year highs against European and emerging-market currencies, sending commodity prices into a freefall. Oil fell as much as $5.19 per barrel to $62.85 at one point on the New York Mercantile Exchange. Through all the tumult, Treasury bonds rallied, with the yield on 30-year notes falling the lowest level since ordinary sales began in 1977. Prices move in the opposite direction of yields.

The situation seemed more dire early in the day, as futures on the S&P, Dow and Nasdaq were all halted in premarket trading after reaching the maximum decline allowed, following sharp declines in overseas markets. But the crash never came to fruition in the regular session, as stocks and commodities recouped some or all of their losses as the day went on, and the flight to Treasuries eased up a bit. For instance, gold was poised to post its biggest weekly loss, at one point dropping to $681 per ounce, before gaining more than 3% in a late-day rally.