Stocks Pummeled by Eurozone, Fiscal Cliff Worries

Decliners finished ahead advancers by a 2.7-to-1 ratio on the New York Stock Exchange and a 2.8-to-1 ratio on the Nasdaq. Volume totaled 3.77 billion on the Big Board and 1.88 billion on the Nasdaq.

All sectors closed in the red with capital goods, energy, services and technology seeing the deepest declines.

Apple (AAPL) shares slumped another 3.7%. The tech giant has fallen 20% from its mid-September high and is now officially in bear market territory, according to Schaeffer's Investment Research, amid growing concerns about the company's perceived lack of innovation.

Thursday's economic data was mostly positive. The Census Bureau said the U.S. trade deficit narrowed to $41.5 billion in September, down from the previous deficit figure of $43.8 billion that was revised from $44.2 billion. A trade deficit of $45 billion was expected for September.

"There were good economic numbers today," said Peter Cardillo, chief market economist at Rockwell Global Capital. "The trade deficit shrank as opposed to showing an increase. Narrowing bodes well for economic activity this quarter."

"Psychologically the market is going to take some time to repair yesterday's damage ... the next four or five days before we begin to consolidate," he added. "The market is focused very much on the fiscal cliff right now. I'm looking at some kind of agreement on the extension of tax cuts -- more or less another patch job. Eventually it will be worked out. In the meantime, the market is going to be subject to that fear factor of the fiscal cliff, and of course Europe."

Also, The Labor Department reported that initial jobless claims for the week ended Nov. 3 fell by 8,000 to a less-than-expected 355,000 from the previous week's unrevised figure of 363,000. On average, economists were expecting the figure to rise to 370,000.

"This is hard to read ... claims we dismiss as Sandy impacted and so [are] likely to rise in weeks to come," noted David Ader, a strategist at CRT.

The four-week moving average was 370,500, an increase of 3,250 from the previous week's unrevised average of 367,250.

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