(By Salman - iStockAnalyst Writer)US Stocks retreated sharply on Friday as non-farm payrolls and unemployment rate data stoked recession fears and dampened investor sentiment. Investors also remained skeptical about the effectiveness of the $ 700 bailout plan, which finally got congressional approval on Friday. A virtually frozen credit market also weighed upon markets.

The Dow Jones Industrial Average tumbled 157.15 points, (-1.50%), to finish at 10,325.70. The S&P 500 fell 15.04 (-1.35%), to 1,099.24 points. The Nasdaq Composite lost 29.33 points, (-1.48%), to end at 1,947.39. Earlier, Dow Jones climbed almost 3% after the rescue plan was approved by House of Representatives, but later could not hold on to gains and slipped into the red. The indices settled the week with hefty losses, with Dow finishing with a weekly loss of 7.4% or 157.47 points. The S&P 500 shrank 9.4% on the week while Nasdaq Composite declined 10.8% from last Friday's close.

A release by Department of Labor showed U.S. employers slashed 159,000 net jobs in September, the worst in 5 years. Economists were expecting a drop of 105,000 in non-farm payrolls. The economy has now eliminated total of 760,000 jobs this year. September was nation's ninth consecutive month of job cut. Unemployment rate for September remained same as that of August, i.e. 6.1%.

The ISM Non-Manufacturing Index (NMI) however dropped less than estimated to 50.2 in September, down from 50.6 in August.

The House of Representatives approved the revised $700 billion bailout plan aimed at containing the current crisis in financial markets and restore investors confidence. The plan empowers the US Treasury to buy bad mortgage debts and toxic assets from troubled financial companies and prevent any further collapse. The revamped plan included a hike in federal deposit insurance limit and a number of tax breaks. President Bush immediately signed the measure into law. Earlier, on Monday, lawmakers at House of Representatives had rejected the plan.

Money markets remained in distress even as Central banks around the world pumped money into the markets. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in euros increased to 5.33 percent, an all-time high, the British Bankers' Association said. Also, the Libor-OIS spread, the difference between the three- month dollar rate and the overnight indexed swap rate, climbed to 273 basis points on Friday. It is the third consecutive day the spread has risen to an all-time high.

In what was a surprising development, Wells Fargo announced on Friday that it is acquiring Wachovia in an all-stock transaction worth about $15.1 billion. Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia Corp. at about $7 per share. In a statement released to press, Wachovia CEO Robert Steel said “This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support".

Citigroup, while expressing its displeasure on Wachovia's deal with Wells Fargo said, "Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia. In addition, Wells Fargo's conduct constitutes tortious interference."Citigroup (C) had previously reached a deal to buy Wachovia's banking operations with FDIC help.

Citigroup Inc. shed $4.15 or 18.44% to $18.35.Wells Fargo (WFC) retreated 60 cents or 1.71% to $34.56. Wachovia (WB) jumped $2.30 or 58.82% to $6.21.

Bank of America Corp.(BAC) lost 5.2% while J.P Morgan fell 7.92%.

Leading bond insurer MBIA Inc. was off 10%.

Shares of homebuilder Lennar slid 13.03%.

Ford Motor Co. (F) retreated 6.9% after it announced that it is selling 500 million dollars in common stocks to retire short-term debt owed by Ford Motor Credit.

Airlines stocks fell sharply in Friday's trade after they reported a drop in passenger traffic. AMR Corp. (AMR -10.4%) and US Airways Group Inc. (LCC) slumped 10.38% and 6.21% respectively.

Among Technology stocks, Adobe Systems (ADBE) decreased 4.34% after UBS downgraded its rating on the company to sell from neutral. iPhone maker Apple (AAPL) too was down 3.03%.

Merck & Co. (MRK) remained the bright spot, with its stock gaining 2.2%.

European markets advanced in Friday's trade. U.K. FTSE rose 109.91 (+2.26%) to 4,980.25. The German DAX and French CAC gained 2.41% and 2.96% respectively.

Among Asian Stocks, Nikkei 225 Average fell 1.94% while Hang Seng Index dropped 2.90%.
NYMEX Crude oil for November delivery was little changed at $93.88, down $0.09 from previous closing.

Disclosure: Author does not own any of the stocks discussed here.