The Dow industrials took their biggest daily tumble in more than seven months Friday, caught up in a two-day selloff in emerging-market stocks and currencies.

Traders said that despite the scope of the decline, fund managers weren't overly urgent in selling. Rather, they pointed to short-term players selling baskets of stocks, such as index futures or exchange-traded funds, as a way to protect against losses elsewhere in their portfolios. Buyers, meanwhile, pulled to the sidelines, content to wait before putting money to...