Leading companies such as Volvo, Sandvik and Ericsson all saw their share prices dip.
A weakened dollar and a credit warning from American bank Wachovia led a downward turn on European markets, but it was the Stockholm exchange that fell hardest.
By close of business, the OMXS index had fallen by 2.5 percent to 362.3.
Most of the major companies on the OMXS index suffered major losses on Friday. Volvo fell by 4.1 percent to 116 kronor, Ericsson shed 3.5 percent to finish on 13.82 kronor and Sandvik dropped by 51 percent to 111 kronor.