NEW YORK – The stock market tumbled again Thursday after investors' already bleak view of the world economy worsened with another drop in the euro and disappointing U.S. employment news. Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.
The Dow Jones industrial average fell more than 250 points in morning trading.
With Thursday's drop, the Standard & Poor's 500 is down more than 10 percent from its 2010 trading high last month. Such a drop is considered by many analysts to be a "correction" in the market. Many analysts pay more attention to drops from closing highs, however, not trading highs. If the S&P 500 index closed at its present level it would be the first correction since stock indexes hit 12-year lows in March last year.
The euro is falling again and continues to hover near a four-year low. It has become a key indicator for confidence in Europe's economy. The euro fell to $1.2318, a day after hitting $1.2146.
"There's a question out there now that potentially we could be talking about a collapse of the eurozone or countries breaking away from the euro," said Tim Quinlan, an economist at Wells Fargo & Co. As recently as four months ago, that wasn't even considered a possibility, Quinlan said.
Such a stark change in views has unnerved investors. The euro, which reflects investors' confidence in European economies, is now largely driving stock trading. Major European indexes gave up their morning gains and turned sharply lower after the euro retreated.
Meanwhile, the Labor Department's latest employment report added to investors' worries about the global economy. They have been selling heavily the past few weeks amid growing concerns that Europe's debt problems will halt the recovery in the region and hurt the rebound in the U.S.
The department said new claims for unemployment benefits rose by 25,000 to 471,000, their largest amount in three months. That came as an unpleasant surprise to investors who were expecting a slight drop to 440,000. High unemployment remains one of the biggest obstacles to a sustained recovery in the U.S. The latest report snapped a streak of four straight weekly declines and again calls into question the strength of the job market.
Weekly claims have been stuck around 450,000 since January, unable to break closer to the 425,000 range that is considered a sign that employers are regularly hiring new workers.
A private research group reported an unexpected drop in its index of leading economic indicators. The Conference Board's indicator of future economic activity slipped in April for first drop since the stock market's bottom last year in March. Economists polled by Thomson Reuters had expected a gain. The slip signals that growth could slow this summer.
In late morning trading, the Dow fell 251.13, or 2.4 percent, to 10,193.24. The S&P 500 fell 29.83, or 2.7 percent, to 1,085.22. The Nasdaq composite index fell 69.52, or 3 percent, to 2,228.85.
As investors pulled out of stocks and other risky investments like commodities, they moved into safer investments such as U.S. Treasurys.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.24 percent from 3.37 percent late Wednesday.
The demand for safety rose after Greek workers again took to the streets protesting recently approved budget cuts that were necessary for the country to receive a bailout. Greece was able to repay debt that came due Wednesday only because it had access to a rescue package from the European Union and International Monetary Fund.
The Dow has fallen for nine of the past 12 days. The Dow dropped 115 points on Tuesday and 67 points on Wednesday.
Commodities prices tumbled after investors pulled back on risky investments.
Crude oil fell $2.73 to $67.14 per barrel on the New York Mercantile Exchange.
Energy companies posted some of the steepest drops. Exxon Mobil Corp. fell $1.26, or 2 percent, to $61.19, Chevron Corp. fell $1.97, or 2.6 percent, to $74.63.
Industrial stocks also slumped amid concerns that a weak global economy will curb demand for all kinds of goods. Aluminum producer Alcoa Inc. fell 57 cents, or 4.8 percent, to $11.21, while heavy equipment maker Caterpillar Inc. slid $2.74, or 4.5 percent, to $58.70.
At the New York Stock Exchange, only about 100 stocks rose compared to 2,930 that fell. Volume came to 509 million shares, compared with 454 million traded at the same point Wednesday.
The Russell 2000 index of smaller companies fell 23.66, or 3.5 percent, to 650.74.
In afternoon trading, Britain's FTSE 100 fell 2.6, Germany's DAX index dropped 2.8 percent, and France's CAC-40 plummeted 3.9 percent.
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