Global economic jitters send stocks in correction

Pressured by Europe debt crisis, slow economic recovery and uncertainty in financial reform, all three major indexes of U.S. stocks broke the 10 percent correction level from previous highs on Thursday.

Thursday’s heavy sell-off came as an increase in jobless claims further pressured on a market worrying about euro zone economies.

All three major indexes ended sharply lower, with Nasdaq off more than four percent. The tech-heavy index is now heading to the largest monthly drop since September 2008.

Dow lost more than 370 points, or 3.6 percent, the largest percentage drop since March 5, 2009.

All 30 component stocks of the Dow fell, while 497 of the 500 S& P component shares ended lower.

Worries over European debt crisis have been weighing on the market. Germany’s ban on naked short selling intensified the concerns and investors were uneasy about the possibility of Greece contagion.

Meanwhile, the U.S. Senate on Thursday approved to wrap up debate on the biggest overhaul of the country’s financial industry. The bill is expected to clear the floor before end of this week. The vote could take place from Thursday afternoon to Friday evening.

Banking shares were under pressures as investors awaited details of potentially tougher regulations.

Fear has occupied the market, and even a rebounding euro failed to lift shares. The Chicago Board Options Exchange’s vitality index, a gauge of the fear in the market, soared more than 26 percent to 44.51, highest level in a year.

Riskier assets including energy commodities took a hit. Oil prices at one time plunged about eight percent to below 65 dollars a barrel before settling just above 68 dollars. Economic data released in United States offered little comfort to investors.

The Labor Department reported that the number of workers filing new claims for unemployment benefits rose by 25,000 to a seasonally adjusted 471,000 from an upwardly revised 444,000 for the week ending May 15, while analysts were expecting a moderate drop.

Meanwhile, the moving average of new claims over the past four weeks also inched up by 3,000 to 453,500.

The sell off accelerated after the Conference Board said its index of U.S. leading economic indicators, an index meant to gauge the future strength of the U.S. economy, slipped 0.1 percent last month, the first decline in more than a year.

The report added to investors’ worries about the global economy. They have been selling heavily the past few weeks amid growing concerns that Europe’s debt problems will halt the recovery in the region and hurt the rebound in the U.S.

The Dow Jones industrial average plunged 376.36, or 3.60 percent, to 10,068.01. The Standard & Poor’s 500 index tumbled 43. 46, or 3.90 percent, to 1,071.59 and the Nasdaq plummeted 94.36, or 4.11 percent, to 2,204.01.


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