The Dow Jones industrials dropped more than 100 point immediately after the opening bell on Friday and continued to fall through out the day, ending down more than 300 points.
American International Group, the worlds largest insurer, posted the worst quarterly loss in its history on Thursday night, causing shares of financial services firms to fall throughout the day Friday.
At the end of the day, the Dow was down 315.79 points at 12,266.39, the Standard & Poors 500-stock index fell 2.7% to 1,330.63, and the Nasdaq composite fell 2.6% to 2,271.48.
Overseas, the Nikkei 225 index in Tokyo lost more than 2.3%, and other major European indexes were down approximately 1.5%.
Consumer confidence plunged in February to a 16-year low, and the U.S. dollar continued its fall against the euro.