NEW YORK (MarketWatch) -- U.S. stocks fell with a thud Thursday, with sentiment shaken by a sharp rise in the nation's first-time jobless claims and by troubled bond insurer MBIA Inc.'s report of a $2.3 billion fourth-quarter loss.
The latest news on the bond insurers "is part of the trepidation in the marketplace, and higher-than-expected jobless claims are putting a bit of a spook on what the payrolls number might be tomorrow," said Art Hogan, chief market strategist at Jefferies & Co.
"Amazon's numbers weren't great and Starbucks is off a bit; I can't find any silver linings in all these clouds," said Hogan.
The Dow Jones Industrial Average declined 98.2 points to 12,344.6, with 23 of its 30 components trading lower, led by Merck & Co. , recently off 2.7%. Shares of fellow blue chip Boeing Co. slipped 2.4%, and General Motors Corp. traded down nearly 2%.
The S&P 500 fell 18.75 points to 1,347.06, while the Nasdaq Composite shed 17.7 points to 2,331.3.
On the New York Stock Exchange, volume showed 360 million shares traded, and declining stocks outran those advancing by a margin of 3 to 2. On the Nasdaq, 516 million shares changed hands, with decliners topping advancing stocks by almost 9 to 5.
Ahead of the opening bell, stock futures more than doubled their losses after the government reported the largest weekly gain in claims for first-time unemployment benefits since September 2005. .
On the New York Mercantile Exchange, gold for April delivery gained 30 cents to $926.60 an ounce, while crude fell $2.30 to stand at $90.03 a barrel.
In the currency market, the dollar traded mixed, slipping against the yen but rising against the euro.
Shares of MBIA fell 2.7%, retreating after the biggest bond insurer reported overnight a $2.3 billion loss during the fourth quarter. The company took a large hit due to the U.S. housing downturn, the results showed.
Amazon.com more than doubled its fourth-quarter profit, but the online retailer's forecast for operating income disappointed investors, with shares of the company recently easing 0.4%.
Also trading lower, Starbucks Corp. reported after Wednesday's close a slight rise in profit and laid out plans to curb U.S. store growth as traffic fell at its coffee shops for another quarter. .
On the rise, shares of MasterCard Inc. climbed 9.5%, after the credit-card company reported a large jump in quarterly income.
Also rallying, shares of Alliance Data Systems Corp. advanced nearly 20% after the credit-card processor's quarterly results and outlook sparked analysts' upgrades.
Overseas, European shares fell heavily as investors worried about the possibility of more write-offs in the financial sector. .
And in Asia, stocks ended on a mixed note after a volatile session. .
On Wednesday, U.S. stocks briefly rallied after the Federal Reserve again cuts its target interest rate -- this time by half a percentag point to 3%, its lowest level in more than two years -- but closed the session with losses. The Fed's move followed last week's emergency cut of three quarters of a point as the central bank works to curb the risk of recession.
By Kate Gibson