Stocks plunged, with the Dow Jones Industrial Average ($INDU -4.31%) tumbling 513 points, their worst one-day loss since December 2008 and ninth-worst point loss, as investors worried that the U.S. economy may be slipping back into a recession. The overall market carnage wiped out all of the 2011 gains for the major averages.
The market rout was prompted in part by concerns that the Federal Reserve won't try to boost the economy again and the prospects of little -- if any -- help on the way from the federal government. A huge concern was what Friday's big jobs report will say. In addition, there were deep fears about the health of the European financial system; stocks on the continent fell sharply. Stocks in Brazil were down nearly 6%.
With today's losses, the market is now in a correction, with the Dow, Standard & Poor's 500 Index ($INX -4.78%) and the Nasdaq Composite Index ($COMPX -5.08%) all down more than 11% from the closing highs for 2011, reached on April 29. Nearly all of the declines for the indexes have come since July 21; the Dow's loss in that time is about 1,340 points.
Gold briefly surged above $1,680 an ounce for the first time and then sold off, and crude oil dropped below $88 a barrel for the first time since mid-February.
The Dow closed down 513 points, or 4.3%, to 11,384. The S&P 500 was off 60 points, or 4.8%, to 1,200, its lowest level since Nov. 30, 2010. The Nasdaq was off 137 points, or 5.1%, to 2,556, its lowest level since Dec. 1, 2010. The Nasdaq 100 Index ($NDX -4.57%) was down 106 points, or 4.6%, to 2,207.
Dow drops 500 points
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While gold fell back, investors bid hotly for Treasurys. The 10-year Treasury yield fell to 2.458% from Wednesday's 2.599%.
Gold settled down $7.30 to $1,659 an ounce after reaching as high as $1,684.90. Silver was off $2.33 to $39.43 an ounce, a decline of 5.6%. Crude oil was down $5.30, or 5.8%, to $86.63 a barrel, its lowest level since Feb. 18 as the Egyptian revolution neared its climax. It had reached as low as $86.04.
What started the blow-off?
The supposed trigger was a weak report on initial jobless claims. They were down 1,000 to 400,000. A week ago's estimate of 398,000 was revised to 401,000.
The number raised the worries for Friday's nonfarm payrolls and unemployment report. The report, which will come out at 8:30 a.m. ET, is expected to show little change in the unemployment rate, which was 9.2% in June, and maybe a 85,000 gain in nonfarm payrolls.
But there were other big issues, including a move by the Bank of Japan to push the yen lower against major currencies, especially the dollar.
In addition, European stocks plunged on worries that debt problems for Greece, Portugal, Italy and Ireland were worsening. The European Central Bank unexpectedly began large-scale intervention in the eurozone debt markets, the first time since March, buying bonds in an apparent attempt to prevent the region's sovereign debt crisis from engulfing Italy.
The market tensions also set off a furious battle between investors wanting safety in Swiss francs and the Japanese yen and the central banks of those countries, which don't want their economies priced way too high.
Worst sell-off in over 2 years
Today's sell-off was the worst for the major averages since Dec. 1, 2008. Very little was spared.
General Motors (GM -4.34%, news) was down to $25.99 after second-quarter results beat estimates. But the company warned that the second half of 2011 may be lower than first-half profits. Ford Motor (F -6.78%, news) fell to $10.86.
Mighty Apple (AAPL -3.87%, news) and Google (GOOG -3.93%, news) were off to $377.37 and $577.52, respectively.
All 30 Dow stocks were lower. The best performer was Kraft Foods (KFT -1.52%, news), which dipped to $33.78. The company announced plans today to spin off its North American grocery business to shareholders, splitting the existing company in two. The grocery business would consist of the company's U.S. beverages, cheese, convenient meals and grocer segments and nonsnack items in Canada and Food Service.
Only 3 S&P 500 stocks were higher: Motorola Mobility (MMI +3.64%, news), Vulcan Materials (VMC +1.64%, news) and PG&E (PCG +0.42%, news).
None of the Nasdaq-100 stocks was higher. The top performers were Sears (SHLD -0.71%, news) and Costco (COST -0.74%, news), down to $66.87 and $76.51, respectively.
Dow plunges 513 points
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