The number of people applying for unemployment benefits rose to 429,000 last week, much higher than economists expected and the largest rise in four weeks. Applications have stayed above 400,000 for more than two months, the latest sign that hiring has weakened from earlier this year.
"This is no longer looking like a small soft patch," said Lawrence Creatura, who manages a stock portfolio at Federated Investors. "It's beginning to look more like quicksand."
Oil prices fell 5 percent after the International Energy Agency said 60 million barrels of oil would be released from reserves to make up for the loss of Libyan exports. That sent Exxon Mobil Corp., Chevron Corp. and other energy stocks sharply lower.
In contrast, airlines stand to benefit from cheaper fuel costs. Their stocks were mostly higher. United Continental Holdings Inc. gained 4 percent and JetBlue Airways Corp. 2 percent.
The Dow Jones industrial average is down 184 points, or 1.5 percent, at 11,926 in early trading.
The Standard & Poor's 500 index is down 19 points, or 1.5 percent, at 1,267. The Nasdaq is down 37 points, or 1.4 percent, at 2,631.
Among the most active stocks, Bed Bath & Beyond gained 5 percent after the home furnishings retailer posted a 31 percent jump in income. The company also raised its earnings forecast for the rest of the year.
ConAgra Foods Inc. fell 2 percent. The owner of Slim Jim and Hebrew National brands cut its earnings estimate for the current quarter.
All three indexes closed lower Wednesday after Federal Reserve Chairman Ben Bernanke said problems plaguing the economy may last longer than previously thought.
The Fed also lowered its forecast for U.S. economic growth this year. The Fed said it now expects the economy to grow between 2.7 percent and 2.9 percent this year, down from its previous estimate of slightly more than 3 percent.
Worries over the U.S. economy piled pressure on world stock markets Thursday, while oil prices sank after a shock decision by the International Energy Agency to release crude reserves to make up for tight supply.
As well as sending oil prices over 5 percent, the decision by the IEA, which represents the interests of many major oil consuming countries as well as the U.S., had a major impact on stocks.
Oil companies from BP PLC in Britain to Total SA in France and ExxonMobil Corp. in the U.S. were all marked down heavily in the wake of the news, adding to the already depressed mood in stock markets.
Following the IEA's decision to release 60 million barrels of oil over the coming 30 days, a barrel of crude as traded in New York was down $5.22 a barrel at $90.23 while the London equivalent, known as Brent, was $6.21 a barrel lower at $108.
The mood in stock markets has been downbeat ever since Wednesday's warning from Federal Reserve chief Ben Bernanke that the problems plaguing the U.S. economy "may be stronger and more persistent" than originally thought. However, with inflation at relatively high levels, Bernanke gave no indication the central bank will back another monetary stimulus after the current $600 billion program runs out at the end of the month.
The slowing U.S. recovery was evident in figures Thursday that showed the number of Americans applying for unemployment rose 9,000 last week to 429,000, while new home sales fell 2.1 percent.
"As the Fed says, housing remains depressed," said Sal Guatieri, senior economist at BMO Capital Markets. "It's likely to stay that way until job growth picks up, and the latest jobless claims figures are far from encouraging."
Stocks have been falling all day but the selling pressure accentuated when Wall Street opened for business.
In Europe, the FTSE 100 index of leading British shares was down 1.6 percent at 5,683 while Germany's DAX fell 1.8 percent to 7,149. The CAC-40 in France was 2.1 percent lower at 3,786.
In the U.S., the Dow Jones industrial average was down 1.6 percent at 11,910 while the broader Standard & Poor's 500 index fell a similar rate to 1,267.
Investors will be keeping a close watch on developments in Brussels, where leaders from the 27 EU countries are gathering for a regular summit.
Greece's debt crisis is likely to be one of the main discussion points ahead of next Tuesday's Parliamentary vote in Athens. If lawmakers in Athens pass a further €28 billion ($40.24 billion) in budget cuts and new taxes and back a €50 billion privatization program, then the eurozone countries will hand over €12 billion ($17 billion) in bailout funds that Greece needs to avoid bankruptcy in mid-July.
"The EU summit is also going to keep investors alert in case there is any definitive line made on Greece, the next tranche of loans or what a second bailout may look like," said Joshua Raymond at City Index.
The Greek crisis kept currency traders on edge, with the euro down 1.2 percent at $1.4148. The currency was also hurt by the retreat in global risk appetite. When investors are willing to take on risk, the euro usually rallies against the dollar and vice versa.
Earlier in Asia, Japan's Nikkei 225 closed 0.3 percent lower at 9,596.74, while Hong Kong's Hang Seng lost 0.5 percent to 21,759.14.
Chinese shares bucked the trend, with the Shanghai Composite Index up 1.5 percent to 2,688.25 and the Shenzhen Composite Index gaining 2.1 percent to 1,111.18. Shares in cement, glass and furniture rallied due to government plans for massive construction of public housing.
____
Pamela Sampson in Bangkok contributed to this report.
Post a Comment