Stocks Close Short Session Lower on Dubai Fears

Stocks closed lower on Friday as Dubai's financial troubles roiled global markets.
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NEW YORK (

TheStreet

) -- Stocks closed lower Friday after spending a day in the red, as markets absorbed concerns about Dubai's request to

delay repayment

of debt and investors ditched risky investments.

The

Dow Jones Industrial Average

closed down by 154.5 points, or 1.5%, to 10,309.9 during Friday's shortened trading session. The

S&P 500

lost 19.1 points, or 1.7% to 1091.5 and the

Nasdaq

was down by 37.6 points, or 1.7%, to 2138.4. Still, the Dow finished the short week up 1.4%, while the S&P 500 added 1.8% and the Nasdaq's tacked on 1.4%.

Dubai's debt issues stole the spotlight in U.S. markets Friday, a day characterized by light trading volumes since markets were closed on Thursday for the Thanksgiving holiday and shut at 1 p.m. on Friday. Trading volume was 50% lower on the Nasdaq, compared to its 10-day average. Volumes for the Dow Jones Industrial Average and the S&P 500 were off by 37% and 44%, respectively, adding to the day's volatility.

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"Obviously, the debt restructuring has caught investors very much by surprise," said UBS analyst Saud Masud, who believes the UAE and Dubai governments wouldn't risk so much damage to their financial reputation unless it was essential to a larger plan of achieving long-term stability.

"We see the Dubai government as possibly accepting the challenge of restructuring 'Dubai Inc.' by allowing market forces to prevail. In other words, certain troubled entities will be forced to take the responsibility for restructuring their debt and work hard to rebuild themselves. This may significantly damage investor confidence in the short term ... nevertheless, further out, this approach might increase the strength of the corporate sector in Dubai and attract an investor base that is more focused on the longer term," Masud said.

The Dubai news caused rattled investors to dump risky investments at signs that the economic crisis hasn't yet played out. Friday morning saw

currency markets in risk-aversion mode. By the time major exchanges closed on Friday, the Dollar Index was up 0.3%.

Commodity prices were down across the sector, with

crude oil

for January delivery shedding $1.98, or 2.5%, to $75.98 a barrel. Gold prices took a beating early in the day, with the most-actively traded February contract plunging as much as 4.4%, to $1,135.80 an ounce. It was last down by 14.60, or 1.2%, to $1,174 an ounce.

In equity markets, the

U.S. financial sector took a hit from the Dubai news as investors remained uncertain on the group's exposure to the debt.

Low gold and oil prices also battered shares of gold miners and integrated oil companies. Shares of

Goldcorp

(GG)

,

New Gold

(NGD) - Get Report

and

Yamana Gold

(AUY) - Get Report

all finished Friday's session down by more than 4%.

Shares of

ConocoPhillips

(COP) - Get Report

and

Chevron

(CVX) - Get Report

each shed 1.9%, while

Exxon Mobil

(XOM) - Get Report

was down by 2.1%.

Overseas, Hong Kong's Hang Seng fell 4.8%, and Japan's Nikkei dropped 3.2%. The FTSE in London finished up by 1% and the DAX in Frankfurt rose 1.3% on Friday.

With no economic reports and few earnings results during the day's abbreviated session, investors also kept an eye on retailers vying for consumers' business on

Black Friday

. Stores across the country opened their doors in the early morning hours to bargain-crazed shoppers. Investors, however, will have to wait until sales results from the busy shopping weekend are assessed to get a better read on the strength of U.S. consumers.

Signs recently have been indicating greater resilience. On Wednesday, the Commerce Department said personal spending rose 0.7% last month -- an encouraging development since it fell 0.6% in September.

Also on Wednesday, the Reuters/University of Michigan Surveys of Consumers finalized its November consumer sentiment level at 67.4, which was down from October but still better than expected.

Even though jobless claims fell to the lowest level since September 2008 last week, the unemployment rate is the highest it's been in more than 25 years.

Still, companies are doing what they can to encourage spending. Although Black Friday has traditionally been the kickoff of the holiday shopping season, desperate retailers have been expanding sales incentives into the Thanksgiving holiday. This year, a handful of merchandisers like

Gap

(GPS) - Get Report

and

Wal-Mart

(WMT) - Get Report

kept their doors open Thursday, hoping to entice reticent shoppers with special discounts. Their stocks closed the session down by 1.7% and 0.6%, respectively, and the

Retail HOLDRs

(RTH) - Get Report

exchange-traded fund finished down by $1.07, or 1.1%, at $94.29.

-- Written by Melinda Peer in New York.