NEW YORK - Stocks retreated early Thursday as investors remained worried about the soundness of Lehman Brothers Holdings Inc. and other financial names and grappled with fresh concerns about the nation's unemployment rate. The major indexes declined more than 1 percent.
Wall Street's latest unease about the financial sector follows Lehman's announcement Wednesday that it plans to sell its investment management unit and spin off its commercial real estate assets. The company is seeking to raise cash after making bad bets on holdings tied to real estate.
But traders and analysts appeared unimpressed with the steps outlined by the nation's No. 4 investment bank, punishing the stock in early trading. Citigroup and Goldman Sachs lowered their ratings on the stock to "hold" from "buy." Lehman fell $2.98, or 41 percent, to $4.27 in the early going.
Other financials also logged steep declines as investors worried about the health of balance sheets across Wall Street. American International Group Inc. fell 10 percent and Washington Mutual Inc. lost 16 percent. Among other financials, Merrill Lynch & Co. lost 10 percent and Morgan Stanley fell 5.6 percent.
Investors also faced fresh concerns about consumers after the Labor Department reported that the number of people seeking jobless benefits dropped 6,000 last week to a seasonally adjusted 445,000. Analysts, on average, had expected a reading of 440,000. The four-week moving average rose slightly to 440,000.
The average number of claims remains at a level that some economists say is worrisome. And the report comes a week after the government said the nation's unemployment rate rose to 6.1 percent in August, a five-year high. A shaky job market can be hard on consumers who also face tighter credit and a weak housing market. That worries investors because consumer spending accounts for more than two-thirds of U.S. economic activity.
In the first hour of trading, the Dow Jones industrial average fell 163.90, or 1.45 percent, to 11,105.02.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 20.11, or 1.63 percent, to 1,211.93, and the Nasdaq composite index slid 36.70, or 1.65 percent, to 2,192.00.
Bond prices rose as stocks pulled back. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.59 percent from 3.63 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 19 cents to $102.39 on the New York Mercantile Exchange as investors eyed Hurricane Ike over concerns it could damage energy installations in the Gulf of Mexico.
In other economic news, the Commerce Department said the nation's trade deficit jumped in July to the highest level in 16 months as oil imports reached a new high. That offset strong export growth.
In corporate news, railroad CSX Corp. rose $3.22, or 5.9 percent, to $58.07 after raising its 2008 and long-term financial forecasts.
Overseas, Japan's Nikkei stock average fell 1.98 percent. In afternoon trading, Britain's FTSE 100 fell 1.68 percent, Germany's DAX index fell 1.48 percent, and France's CAC-40 lost 1.71 percent.