Wall Street Tumbles as Job Losses, Bad Mortgages Pile Up

Alan Gayle, senior investment strategist at RidgeWorth Financial, agreed. "Market expectations were not high ... regardless of what the official consensus was," he said. He pointed out that it's dangerous to compare today's 533,000 lost jobs with a similar absolute decline in the mid-1970s. Because the labor force has grown significantly in the past three decades today's reported losses are not as severe a shock, he said.

Traders were also training a keen eye on the automakers. CEOs from General Motors (GM Quote), Ford (F Quote) and Chrysler are again slated to appear before lawmakers in hopes of striking a bailout deal. Sticking points on the package have included the source of funding, concessions the automakers should make and how much money they should get.

Separately, GM is reportedly planning to lay off an additional 2,000 workers at three factories as it continues to weather a brutal market.

The Wall Street Journal also reported that Chrysler had retained Jones Day as counsel in preparation for a possible Chapter 11 bankruptcy filing.

At this point, said Gayle of RidgeWorth, it appears that the government is prepared to support the auto industry. However, "We have no idea what form that stimulus will take." He said that the impact on the companies' stocks is very hard to determine. "I think a lot of the smart money that wants to play this has been moving into the bonds of the automakers," he said.

The housing market offered additional reasons for investor caution as Friday's session wore on. The Mortgage Bankers Association reported that the mortgage delinquency rate for loans on one-to-four-unit residencies rose 58 basis points sequentially in the third quarter to 6.99%. Year over year, the rate had increased 1.4%, the MBA said.