Dow Plummets to 10,000 Mark
Last updated 6:30 p.m. ET
Stocks buckled Thursday under the growing belief that the global economy is weaker than many investors expected and likely to stop companies from hiring. The Dow Jones industrials traded below 10,000 for the first time in three months.
A flood of bad news, including rising debt levels in European nations and an unexpected jump in the number of Americans filing for unemployment benefits, had investors pulling money out of assets like stocks and commodities that look increasingly risky. Fears of more disappointing news Friday, when the government issues its January employment report, added to the selloff.
"I think the market's decline today really reflects that the confidence in the economic recovery, the confidence on Wall Street in this economic recovery has been deeply shaken," Hugh Johnson of Johnson Illington Advisors told CBS News correspondent Anthony Mason.
Demand for safer investments sent the dollar and Treasurys higher and the euro falling. Major indexes skidded as much as 3.1 percent to their lowest levels in three months. The Dow fell 268 points and briefly traded below 10,000 for the first time since Nov. 6.
The day's news reminded investors that the global economic recovery remains tenuous. It also raised questions about whether the market can resume its rebound from 12-year lows it hit last March.
The latest slide began in Europe, where markets dropped on concerns about onerous debt levels in Greece, Spain and Portugal.
Unemployment in Spain is nearly 19 percent, Greece needs $48 billion to pay its bills and Italy's debt is now bigger than the size of its entire economy, Mason reports.
"That's gonna hurt exports from the U.S., and it hurts U.S. companies which makes it more difficult for the U.S. to claw our way out of this employment problem," Johnson told Mason.
It is becoming harder for countries to contain rising debts and to borrow the money they have been using to try to spend their way out of recession.
The euro hit a seven-month low against the dollar on the news. The rising dollar hurt demand for commodities, which are priced in dollars and become more expensive to foreign buyers when the dollar climbs.
The market's drop was the latest leg of a stumble that began in mid-January. Stocks fell then in response to China's attempts to curb its overheated growth. Those moves raised fears that the other world economies could suffer as a result. The pullback in stocks worsened as leaders in Washington said they would impose tighter regulations on U.S. banks.
"The market is becoming aware that the wall of cash that lifted it last year is coming to an end," said Jon Merriman, chief executive of Merriman Curhan Ford in San Francisco.
Investors also worry that a slowdown in foreign countries would spill over to the U.S. and make it harder for the economy to overcome its biggest problem: unemployment.
The Labor Department said Thursday that claims for unemployment benefits rose by 8,000 to 480,000 last week. The news disappointed investors who had hoped for a drop. It was the fourth increase in the past five weeks.
The jobless claims numbers chilled expectations that the government's January jobs report would show that employers added workers in the first month of the year. Analysts currently expect Friday report to show that employers added 5,000 jobs in January. The government is also expected to report that the unemployment rate ticked up to 10.1 percent from 10 percent.
According to preliminary calculations, the Dow fell 268.37, or 2.6 percent, to 10,002.18. The Dow has fallen 723 points, or 6.7 percent, since closing at a 15-month high of 10,725.43 on Jan. 19.
The broader Standard & Poor's 500 index fell 34.17, or 3.1 percent, to 1,063.11, while the Nasdaq composite index slid 65.48, or 3 percent, to 2,125.43.
Just 273 stocks rose on the New York Stock Exchange, while more than 2,800 fell. Volume came to 1.5 billion shares, compared with 1 billion Wednesday.