Wall Street slumped on Thursday after a weak jobs report fanned fears about the US economic outlook. Financials and resources bore the brunt of renewed investor anxiety.
The markets were on the back foot from the start. Before the opening bell, the government issued its weekly report that detailed an unexpected jump in jobless claims.
The number of Americans filing new claims for unemployment jumped unexpectedly last week, rising to 444,000 from a revised 429,000 the previous week. Economists had expected claims to drop to 420,000.
The sell-off gained momentum after the S&P 500 slipped below 1,261.16, a one-month intraday low said to represent a market support level.
The S&P 500 lost 38.15, or 2.99 per cent to close at 1236.83. This was its longest losing streak since January and largest one-day drop since early June.
The Dow fell 344.65, or 2.99 per cent to 11188.23, while the NASDAQ dropped 74.69, or 3.2 per cent at 2259.04.
Energy plays were pressured by ongoing weakness in crude prices. NYMEX light crude oil for October delivery fell US$1.46 to settle at US$107.89 a barrel, a five-month low. As recently as July, crude prices had topped out at around US$147 per barrel.
Dow components Exxon Mobil and Chevron shed 2.5 per cent and 3.5 per cent respectively. ConocoPhillips lost 3.3 per cent and Schlumberger gave up 2.2 per cent.
Material plays were also weaker, driven lower by concerns about the global growth outlook
Alcoa tumbled 4.2 per cent, Freeport-McMoRan Copper & Gold dropped 6.8 per cent and US Steel was off 5.1 per cent.
ADRs for BHP Billiton and Rio Tinto slid 3.4 per cent and 3.9 per cent respectively.
Among financial firms, Citigroup fell 6.7 per cent, Bank of America dropped 7.2 per cent and JPMorgan was down 4.5 per cent. American Express and American International Group lost 5.3 per cent and 6 per cent respectively.
Merrill Lynch dropped 7.5 per cent, while embattled firm Lehman Brothers tumbled 10.5 per cent despite ongoing talk of bid interest from Korea Development Bank.
Elsewhere, machinery maker Terex dropped 20 per cent after the company warned that 2008 profit wouldn’t meet forecasts. Its larger peer Caterpillar also took a hit, dropping 5.6 per cent and weighing on the blue chip index.
Among technology firms, Ciena reported a sharp slide in fiscal third-quarter profit and warned that fourth-quarter sales wouldn’t meet forecasts. Shares of the network equipment maker slumped 24.9 per cent in Nasdaq trade, dragging on the technology sector.
Google, Microsoft and Intel were down 3.1 per cent, 2 per cent and 4.7 per cent respectively.
On a positive note, Wal-Mart reported stronger-than-expected August same-store sales. Sales rose 3 per cent versus forecasts for a rise of 1.6 per cent. However, the retail giant’s shares were mostly flat.
Positive economic news also seemed to be drowned out. The Institute for Supply Management's reading on the services side of the economy showed expansion in the sector. Economists had forecasted further contraction.
Meanwhile, second-quarter productivity was revised up to a 4.3 per cent annualised rate from an initial rate of 2.2 per cent.
UKmarkets
British shares fell on Thursday after the Bank of England kept rates on hold. Economic fears unsettled the banks and another fall in gold and crude saw commodity stocks lower.
The FTSE 100 closed 137.60, or 2.50 per cent lower at 5362.10.
The Bank of England kept interest rates unchanged at 5 per cent for a fifth month running, but expectations were rising that recession worries could prompt a cut before the end of the year.
Barclays dropped 6 per cent, HBOS fell 6.8 per cent, Lloyds TSB fell 5.7 per cent and HSBC declined 3.3 per cent.
Falling precious metal and energy prices dragged commodities lower, with ENRC down 5.5 per cent, Rio Tinto fell 2.9 per cent, Royal Dutch Shell slipped 3.2 per cent and Anglo American dipped 5 per cent.
Ferrexpo shed 6.3 per cent as the Ukrainian iron ore miner looked set to exit the UK's FTSE 100 index later this month after a quarterly rejig.
BP was down just 0.1 per cent after the company signed a memorandum of understanding to settle its dispute with its TNK-BP joint venture partners in Russia.
BG Group added 0.8 per cent on the back of bid interest from Exxon Mobil. Shares in Tullow Oil rose 0.9 per cent.
British Airways shed 4.8 per cent with a struggling pound and a rise in the price of crude denting sentiment. Cruise operator Carnival fell 3 per cent.
Shares in Marks & Spencer lost 5.4 per cent on reports that the GMB union plans to launch a series of protests against the retailer after it sacked a member of staff for gross misconduct on Wednesday.
On the upside, Unilever jumped 6.1 per cent after the appointment of Paul Polman as its new chief executive.
European markets
European shares closed lower on Thursday as worries over growth in the eurozone and the United States intensified. The market finished at levels last seen in mid-July on the back of a fall in financials, industrials and technology stocks.
Germany’s DAX dropped 187.92, or 2.91 per cent to 6279.57, while France’s CAC 40 slipped 143.12, or 3.22 per cent to 4304.01.
In the banking sector, UBS dropped 5.4 per cent. Banco Santander fell 4 per cent after the European Central Bank decided to leave interest rates on hold this month, as expected.
Banco Espanol de Credito, retreated 4.2 per cent after Citigroup downgraded the shares to sell from hold and Commerzbank sank 3 per cent.
Shares of European industrial groups were among the biggest losers, with ABB down 4.8 per cent and Alstom 6.2 per cent lower. Nestle shares fell 1.6 per cent in Swiss trading.
In the tech space, Siemens closed 4.8 per cent cheaper.
Japanese markets
The Japanese market fell on Thursday on heavy tech selling, mimicking a similar sell-off in the US. Lingering credit worries and the gloom hanging over a potential world recession pushed stocks lower.
The benchmark Nikkei fell 131.93 points, or 1.04 per cent to 12557.66.
Chip-making equipment supplier Tokyo Electron slid 4.4 per cent and Advantest Corp fell 4 per cent.
DRAM chip maker Elpida Memory lost 4.7 per cent on a broker downgrade.
Nippon Electric Glass tumbled 14 per cent and Asahi Glass lost 3.4 per cent after rival, Corning Inc, cut its outlook on slower-than-expected demand for glass used in flat-screen televisions.
Shippers extended losses after a key freight gauge continued to decline, with Mitsui OSK Line plunging 7.3 per cent and Kawasaki Kisen Kaisha falling 5.9 per cent.
On the positive side, gainers included video game developer Tecmo, which jumped 7.5 per cent on news of merger talks with fellow player Koei Co.
Hong Kongmarkets
Hong Kong's benchmark index tumbled to a one year low on Thursday. Slowing economic growth and earnings woes weighed on materials and telco stocks.
The benchmark Hang Seng Index fell 195.58 points or 0.95 per cent lower at 20389.48.
China Communications Construction plummeted 13.7 per cent to a 15 months low, as softening investment growth in China's construction sector and input price hikes savaged analyst forecasts.
Shares in China Netcom closed 2.2 per cent higher after Telefonica agreed to expand its stake in the company by 5.74 per cent for 802 million euros.
Wireless operator Unicom, which is merging with Netcom under a government-orchestrated reorganisation, also gained 2 per cent.
Kingway Brewery Holdings, which is slated to announce its interim earnings on Friday, was 23.5 per cent dearer.
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