NEW YORK – Fresh worries about widening unemployment added to investors' list of concerns about the economy Thursday and extended Wall Street's sell-off to a second day. The major indexes each fell more than 1.5 percent, including the Dow Jones industrial average, which lost 110 points.
Wall Street found added room for concern after new claims for unemployment benefits climbed to a 16-year high. The Labor Department reported that new applications for jobless benefits rose to a seasonally adjusted 542,000 last week from a downwardly revised figure of 515,000 in the previous week. That is well above economists' expectations of 505,000, according to a survey by Thomson Reuters.
Fears about the job market, the housing market, the overall economy and a stock market down 48.5 percent from its October 2007 peak have led consumers to sharply curtail how much they take out of their wallets. That's a troubling prospect for Wall Street as consumer spending accounts for more than two-thirds of U.S. economic activity.
Investors' fears grew Thursday after a private research group said the economy weakened in October as stocks, building permits and consumer expectations all fell.
The New York-based Conference Board reported that its monthly forecast of future economic activity declined 0.8 percent in October, worse than the 0.6 percent decrease expected by economists surveyed by Thomson Reuters. The index, which weighs indicators such as manufacturers' new orders and supplier deliveries, has fallen in four of the last six months.
Meanwhile, the Philadelphia Federal Reserve said regional manufacturing continued to weaken in November. Its index of manufacturing activity this month fell to its lowest level since October 1990.
"I think what's happened is there are so many moving parts that nobody is able to understand what all of the implications are," said Joe Clark, managing director of Financial Enhancement Group in Anderson, Ind. He said the worries about the automakers and the fear among consumers are leaving investors unwilling to step in and buy stocks until there is some clarity over how much the economy might slow.
In midmorning trading, the Dow Jones industrial average fell 111.67, or 1.40 percent, to 7,885.61. The Dow on Wednesday tumbled 427 points to close below the 8,000 mark and early Thursday fell below the 7,882.51 trading low seen on Oct. 10. That could add to selling pressure as investors look for a new floor for stocks.
Broader stock indicators also lost ground. Standard & Poor's 500 index fell 15.60, or 1.93 percent, to 790.98, and the Nasdaq composite index fell 14.84, or 1.07 percent, to 1,371.58.
The Russell 2000 index of smaller companies fell 10.53, or 2.55 percent, to 401.85.
Declining issues outnumbered advancers by about 7 to 1 on the New York Stock Exchange, where volume came to 384.5 million shares.
Bond prices rose as investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note fell to 3.16 percent from 3.32 percent late Wednesday. Bond yields move opposite their price. The yield on the three-month Treasury bill, considered one of the safest assets around, fell to 0.02 percent from 0.06 percent late Wednesday.
Light, sweet crude fell $3.54 to $50.08 on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices rose.
Investors who have been groping for a bottom to the yearlong market rout are now worried that Washington's disagreement over whether to bail out the auto industry could lead to bankruptcy of major automakers like General Motors Corp. and could send ripple effects through the economy — including a further blow to consumer confidence.
The plan to give U.S. automakers billions of dollars in government-backed loans remains troubled. Senate Majority Leader Harry Reid, D-Nev., canceled a planned vote Wednesday on a bill that would divert $25 billion for the auto industry from the $700 billion Wall Street financial rescue package. The Bush administration and congressional Republicans have rejected Democrats' plan to tap into that money.
Overseas, Japan's Nikkei stock average fell 6.9 percent, while Hong Kong's Hang Seng Index slid 4.04 percent. In afternoon trading, Britain's FTSE 100 fell 4.56 percent, Germany's DAX index fell 4.90 percent, and France's CAC-40 fell 5.76 percent.