Capping a harrowing week on the markets, jitters over the effectiveness of a newly-passed U.S. government bailout for Wall Street pulled North American stock indexes lower Friday afternoon.

Toronto's S&P/TSX composite index shed 97.19 points to 10,803.35 after strong gains by commodity stocks pushed the index up by more than 400 points earlier in the day.

In New York, the Dow Jones industrial average dropped157. 47 points to finish the week at10,325.38.

Earlier in the day, the Dow had jumped 165.59 points. Meanwhile, the Nasdaq composite index lost 29.33 points and fell to 1,947.39 at the day's end.

The drops came after U.S. President George Bush passed into law a historic plan that will create a US$700 billion lifeline for Wall Street's embattled financial services firms.

Bush signed the bill not long after the U.S. House of Representatives passed the bill 263-171 Friday afternoon.

According to some analysts, the downward trend will continue despite the law's passing.

"We have concerns behind this bill," BNN's Linda Sims told CTV Newsnet Friday, adding that investors still have many questions about the bailout.

"How long is it going to take for it to take effect, is it really going to free up credit markets the way everybody hopes it will, and is it going to avoid what is increasingly looking like a nasty recession?"

Chyanne Fyckes, with Stone Asset Management, said the markets were up earlier in the day because people were looking for bargains.

"You're going to get these rallies in here, but I still think you're going to see further downside," Fyckes said.

On Friday, the Canadian Imperial Bank of Commerce (CIBC) announced it was reducing its exposure to the U.S. residential mortgage market by selling off part of its structured credit portfolio.

The US$1.05-billion deal, which was made with Cerberus Capital Management LP, covers residential mortgage-backed securities and related collateralized debt obligations.

CIBC chief executive Gerry McCaughey said the Cerberus investment will "significantly limit" the bank's future exposure to the U.S. residential real estate market.

Meanwhile, in the U.S., Wachovia Corp. announced it will be acquired by Wells Fargo & Co. in a US$15.1 billion all-stock deal.

The deal, which will be done without U.S. government assistance, wipes out a previous plan Wachovia had to sell its banking operations to rival Citigroup.

The Citigroup deal would have been done with government help.

Overseas, Japan's benchmark Nikkei 225 stock average fell 216.62 points Friday, or 1.9 per cent, to 10,938.14 -- the lowest since May 18, 2005.

In Hong Kong, the Hang Seng index slid 2.9 per cent to 17,682.40, while key indices in Australia, Singapore, India, Malaysia and Thailand also fell.

Only Taiwan was able to record gains on its financial market Friday.

The FTSE 100 index was up 0.4 per cent in mid-afternoon trading in London. Germany's DAX was up 0.5 per cent and the Paris CAC-40 gained 0.5 per cent.

With files from The Associated Press