Watch CBSN Live

U.S. Stocks Extend Losses Amid Signs Of Economic Distress

NEW YORK (MarketWatch) -- U.S. stocks slumped Thursday for a second session as a rise in jobless claims intensified worries about the economy and as Federal Reserve Chairman Ben Bernanke continued testimony before Congress. Investors also were awaiting Friday's employment report.

"Traders and investors still are skeptical that the worst is over," said Kevin Giddis, managing director in charge of fixed-income trading at Morgan Keegan & Co. Inc.

The Dow Jones Industrial Average fell 35.9 points to 12,569.93, with 21 of its 30 components trading lower, the declines led by Hewlett-Packard Co. , recently down 1.5%.

Blue-chip gains were fronted by Chevron Corp. , up 1%.

The S&P 500 declined 3.27 points to 1,364.26, while the technology-laden Nasdaq Composite dropped 12.57 points to 2,348.84.

S&P sectors on the decline were fronted by energy shares, off 1%, followed by financials and industrials, both off 0.8%.

Volume on the New York Stock Exchange topped 1.1 billion, and declining stocks ran ahead of those advancing about 4 to 3. On the Nasdaq, 612 million shares exchanged hands, and decliners edged past advancers 3 to 2.

Ahead of the open, the Labor Department reported first-time applications for state unemployment benefits climbed last week, hitting levels last seen in mid-September 2005. .

Stock indexes pared losses after the Institute for Supply Management's March reading of the services sector proved better than forecast, with its non-manufacturing index rising to 49.6% in March, above the 48.5% reading analysts had expected.

"Today's report is consistent with our view that the economy has decidedly slowed and has likely fallen into only a mild recession," said Lehman Brothers analyst Michelle Meyer.

On Capitol Hill, lawmakers heard testimony about the rescue of Bear Stearns and the government's rescue of the nation's fifth-biggest investment bank. .


The airline sector came under fire after privately held ATA Airlines closed operations and filed for bankruptcy, with the Amex Airline Index falling 0.9%. .

A downgrade of technology bellwether Cisco Systems Inc. also weighed on investor sentiment, with UBS expressing concern over the networking giant's orders growth in switching its recommendation to neutral from buy.

Shares of Cisco fell 2.9%.

Shares of eBay Inc. edged lower after the online auctioneer drew an upgrade to buy from neutral from Merrill Lynch.

On the New York Mercantile Exchange, crude and gold futures gained, with the oil contract up 19 cents to $105.02 a barrel and the metal contract rising $11.80 at $907.0 an ounce.

The dollar index, which measures the U.S. currency against a handful of rivals, was virtually flat at 72.22 vs. 72.24 late Wednesday. .

By Kate Gibson

View CBS News In