Markets gripped by default fear
Fear is once more ruling global markets over the possibility of a sovereign default by Greece and Portugal.
The Dow briefly fell below the crucial 10,000 mark overnight as stocks suffered their worst losses in more than nine months.
Escalating sovereign debt problems in Europe and an unexpected rise in jobless claims put investors on the defensive just ahead of Friday's crucial payrolls report.
Investors dumped banks and commodity-related shares and Wall Street's fear gauge jumped more than 20 percent, fueling worries that the brief respite from the market's late January slide was over.
"We got spoiled last year with the market going up almost non-stop after the March low," Bob Doll, global chief investment officer for equities at BlackRock, told Reuters.
"The consolidation or corrective phase is probably not over."
Worries over the ability of Greece, Portugal and Spain to pay their debts fueled a flight from stocks to the safe-haven U.S. dollar, which hurt commodity prices denominated in the greenback.
The unexpected increase in US weekly initial claims for state unemployment benefits pointed to stubborn weakness in the labor market, and heightened concerns ahead of Friday's employment data.
The Dow Jones industrial average fell 268.37 points, or 2.61 per cent, to close at 10,002.18. The Standard & Poor's 500 Index dropped 34.17 points, or 3.11 per cent, to close at 1063.11. The Nasdaq Composite Index lost 65.48 points, or 2.99 per cent, to close at 2125.43.
The Dow is now off 6.7 per cent from its 15-month closing high of Jan. 19. The S&P 500 is off 7.6 per cent from its 15-month closing high on the same date, while the Nasdaq is off 8.4 per cent from its 16-month closing peak set on Jan. 19.
Spain and Portugal were the latest euro-zone countries to worry investors about mounting fiscal deficits after Greece had rattled markets earlier.
Reflecting investor anxiety, the CBOE Volatility Index, Wall Street's favorite measure of sentiment, spiked 20.7 per cent to end at 26.08.
Bank of America was the Dow's biggest percentage decliner, down 5 per cent at $US14.75. Aluminum company Alcoa Inc fell 4.3 per cent to $US12.91.
The largest US bank's stock was also pressured after New York's attorney general charged former Chief Executive Kenneth Lewis and former Chief Financial Officer Joe Price with fraud for allegedly misleading shareholders about the bank's acquisition of Merrill Lynch & Co.
Also weighing on the financial sector, credit card company MasterCard Inc tumbled 10.3 per cent to end at $US222.11 after it posted quarterly earnings that fell short of Wall Street's estimates.
A rare bright spot came from Cisco Systems Inc, up 0.4 per cent at $US23.16, the Dow's only advancer, after the network equipment maker reported higher-than-expected revenue growth late on Wednesday.
Shares of CME Group Inc, which operates U.S. financial exchanges, slid 7.8 per cent to $US269.29 after the company posted fourth-quarter profit below Wall Street expectations.
Total volume of 11.21 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well above last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 14 to 1, while on the Nasdaq, about seven stocks fell for every one that rose.
Reuters
