Markets dive on jobless claims, Europe concerns

Stocks plunged Thursday after the Labor Department reported that jobless claims increased and investors continued to be concerned that Europe’s debt crisis is spreading.

The Dow Jones industrial average closed down 376.36, or 3.6%, at 10,068.01; the S&P 500 fell 43.46, or 3.9%, ending at 1,071.59; and the Nasdaq composite closed down 94.36, or 4.11%, at 2,204.01. All numbers are preliminary.

Initial jobless claims rose by 25,000 to 471,000 in the week ended May 15, the highest level in a month, according to Labor Department figures issued Thursday. The number of people receiving unemployment insurance and those getting extended payments dropped.

All 30 Dow stocks were down more than 0.9%, while all but six of the S&P 500 companies declined. The cumulative advance-decline line for securities listed on the New York Stock Exchange reached its lowest level since at least July 2004, according to data compiled by Bloomberg.

The stock decline on Wednesday wiped out the 2010 gain for the S&P 500, as Germany’s ban on some bearish investments and a jump in mortgage foreclosures triggered a flight from equities. France, the Netherlands and Finland said they have no plans to follow German Chancellor Angela Merkel’s effort to control what she called “destructive” markets.

The New York Stock Exchange and NYSE Amex cash platforms invoked Rule 48 on Thursday, which is designed to smooth the opening of stocks when futures and overseas markets suggest high levels of price volatility. The regulation is used “only in those situations where the potential for extremely high market-wide volatility would likely impair floor-wide operations at the exchange,” NYSE Euronext said in an e-mail Thursday.

Stock futures extended declines Thursday after initial jobless claims rose by 25,000 to 471,000 in the week ended May 15, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level in a month, Labor Department figures showed Thursday in Washington. The number of people receiving unemployment insurance and those getting extended payments fell.

The decline increased by 0.5% after it slipped beneath 1,093.88, its average for the last 200 days. U.S. stocks pared losses Wednesday after the S&P 500 reached the level, which it has exceeded since July 2009. Technical analysts have also said a level of about 1,100 represents a point at which selling may worsen for both the S&P 500 and the June contract.

“A lot of stops have been triggered when the S&P futures crossed 1,100, and anybody still long will probably have to bail out and head for cover,” wrote Nicolas Lenoir, chief market strategist at ICAP Futures LLC in Jersey City, N.J., in an e-mail. The crossing “could open the flood gates for a lot more de-risking.”

The S&P 500 is now down 10% from its 2010 high on April 23 of 1,217.28.

U.S. stocks fell for a second day Wednesday, wiping out the 2010 gain for the S&P 500, as Germany's ban on some bearish investments and a jump in mortgage foreclosures triggered a flight from equities. France, the Netherlands and Finland said they have no plans to follow German Chancellor Angela Merkel's effort to control what she called “destructive” markets.

The euro fell 0.6% to $1.2347, near the four-year low it reached Wednesday before paring the losses.

“What's happening on the market is not healthy,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees about $425 million in stocks. “There's a risk that political measures and monetary fluctuations may affect the economic growth and investors are worried. The relationship between France and Germany is suffering, and it isn't good for Europe's credibility.”