US Stocks: Worst week in 2011 (ext)

EW YORK (CNNMoney) -- Stocks ended Friday's session sharply lower, posting their worst weekly performance in more than a year, as investors grow increasingly worried that Washington may not reach a deal to raise the debt ceiling before the deadline.

At the preliminary close, the Dow Jones industrial average (INDU) fell 97 points, or 0.8%, to close at 12,143. Friday's selling was broad, with 28 out of the Dow's 30 members trading in the red.

The S&P 500 (SPX) traded down 8 points, or 0.7%, to 1,292; and the Nasdaq Composite (COMP) lost 10 points, or 0.4%, to 2,756. The S&P 500 dropped 3.6% and the Nasdaq lost 3.9% for the week.

Along with the debt ceiling, investors had to work through a disappointing government report showing the U.S. economy grew at a 1.3% annual rate in the second quarter. The data was far worse than expected.

"The GDP number was nothing short of a disaster and worse," said Dave Rovelli, managing director of US equity trading at Canaccord Adams. "We went from little growth to no growth."

Investors remained unnerved after House Speaker John Boehner delayed a vote late Thursday on his plan to raise the debt ceiling. However, after the initial delay, Boehner's bill now has the votes to pass the House. Republican leadership apparently agreed to attach a balanced budget amendment to Boehner's bill to help court the Tea Party.

The market's fear factor -- the CBOE Market Volatility Index (VIX), commonly called the VIX -- jumped up 8.2% in part on both the GDP and debt ceiling news. That's still below 30, which denotes high fear in the marketplace, but the index has shot up more than 46% in just the past five days.

"People are just crossing their fingers that these morons in Congress will get a deal done by Monday," Rovelli added.

But even if Boehner's plan does pass the House, Senate Majority Leader Harry Reid has promised the Democratic-controlled Senate will block it, and President Obama re-emphasized on Friday that he would veto it.

But investors are mostly positive that a deal will get done.

"There's enough ideas in all the bills that have passed in the House and the Senate, that we can cobble something together that everyone can agree to," Orlando said.

The dollar strengthened against the euro and British pound, but weakened against the Japanese yen.

Oil for September delivery fell $1.74, or 1.8%, to $95.70 a barrel.

Gold futures for August delivery jumped $14.90, or 0.9%, to $1,628.30 an ounce. Earlier in the session, gold hit an intraday record of $1,634.90 an ounce.