U.S. stocks sink on Portugal worries

NEW YORK - The U.S. stock market sank at the open Thursday after worries emerged overnight about the financial stability of one of Portugal's largest financial firms. The worries also spread to the European stock and bond markets.

The Dow Jones industrial average dropped 173 points, or 1 percent, to 16,811 in the first 20 minutes of trading. The Standard & Poor's 500 index lost 19 points, or 1 percent, to 1,954 and the Nasdaq composite fell 63 points, or 1.5 percent, to 4,356.

Portuguese bank Espirito Santo Financial Group was forced to suspend trading in its shares Thursday due to accounting irregularities at Espirito Santo International, its largest shareholder. Espirito Santo Financial Group is, in turn, the largest shareholder in Banco Espirito Santo, Portugal's largest bank. The bank's share price fell sharply in morning trading and is an unwelcome relapse for investors. Portugal just concluded its three-year international bailout program in May.

Portugal needed a 78 billion euro ($106 billion) rescue in 2011 during the eurozone's debt crisis.

Major stock indexes tumbled in Germany and France. Both the DAX in Frankfurt and the CAC-40 in Paris slumped 1.9 percent. Britain's FTSE 100 index sank 1.1 percent.

Investors retreated into their traditional safe havens in times of market turmoil: U.S. government bonds and gold. The yield on the U.S. 10-year note dropped to 2.51 percent from 2.55 percent on Wednesday. Gold rose $17.30, or 1.3 percent, to $1,341.50 an ounce.

In a bit of good news here in the states, applications for unemployment benefits sank last week. The Labor Department said weekly applications for unemployment benefits dropped to 304,000. The four-week average, a less volatile measure, dipped 3,500 to 311,500, the second-lowest reading since August 2007.