Surge in oil price sends stocks lower

Stocks dropped Friday after another spike in oil prices overshadowed a report that the unemployment rate fell to its lowest level in nearly two years.

Crude oil rose $2.51 to settle at $104.42 a barrel, its highest level since September 2008, after fighting in Libya escalated.

Markets have been rattled over the past two weeks as higher oil prices threaten to undermine the economic recovery by increasing transportation and production costs.

The Dow Jones industrial average dropped 88.32 points, or 0.7 percent, to 12,169.88. The index had been down as many as 178 points earlier.

The Standard & Poor's 500 index fell 9.82, or 0.7 percent, to 1,321.15. The Nasdaq composite index fell 14.07, or 0.5 percent, to 2,784.67.

Higher energy prices sent stocks lower despite news that the U.S. job market is improving. Employers added 192,000 jobs in February, the fastest pace in almost a year.

"They're tugging at each other, employment and oil," said Jack Ablin, chief investment officer of Harris Private Bank. "Oil is high enough that it has to be a concern. The longer it remains at this level the greater the chance that it upends our recovery."