Updated from 4:17 p.m. EST

Stocks in New York retracted Thursday, giving back some of the gains made earlier in the week, after a jolt of discouraging earnings and economic data offset the House's OK to the stimulus package and Wednesday's "bad bank" euphoria.


Dow Jones Industrial Average

gave up 226.44 points, or 2.7%, to 8149.01, and the

S&P 500

fell 28.95 points, or 3.3%, to 845.14. The


shed 50.5 points, or 3.2% points at 1507.84.

Financials led the decliners on the Dow with losses accelerating in the late afternoon. Worst off were


(JPM) - Get Report


Bank of America

(BAC) - Get Report

, which closed 8% lower apiece. Losses pelted stocks across sectors, though, with

General Motors

(GM) - Get Report

losing 7%, and


(BA) - Get Report

shedding nearly 6%, among others, as the economic downturn proved increasingly far reaching and severe.

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Illustrating that severity were several economic reports. Street watchers hoping for signs of a housing bottom were disappointed to hear from the commerce department that sales of newly built single-family homes fell 14.7% in December, to 331,000, vs. expectations for 400,000.

It was the steepest monthly decline dating back to 1994, and came after the labor department said weekly initial jobless claims increased by 3,000 to 588,000, well above the forecast for 575,000 unemployed seeking benefits. But for Michael Pento, chief economist at Delta Global, the most troubling figure was the number of Americans who continued to claim unemployment insurance -- a seasonally adjusted 4.78 million, the highest since 1967.

Pento believes that the rising unemployment rate will, in turn, keep a cover on the housing market, even with artificially low interest rates, into at least the second half of the year. "Even if we weren't in a bubble, people have to understand that just this huge type of increase in unemployment can cause a fall in home prices," he says.

In other data, orders to U.S. factories for big-ticket manufactured goods fell for the fifth straight month in December, marking the largest annual drop in demand since 2001.

With worrisome economic data adding to a sense of urgency, the Democrat-controlled House approved the Obama administration's historic $819 billion

stimulus plan, with Republicans in unanimous opposition. The vote sent the bill to the Senate, where debate will begin next week.

U.S. government officials are reportedly also throwing around the idea of spending another

$1 trillion to $2 trillion to help restore banks to health, the

Wall Street Journal

reported Thursday. Stocks rallied Wednesday with a surge in financials on news that the Obama administration was considering a "bad bank" to sequester toxic assets that have been poisoning bank balance sheets.

Quarterly earnings reports provided little good news to balance the bad on Thursday, as they continued to serve as a sobering reminder of the breadth of the recession.


(SNE) - Get Report

said Thursday that

its net profit tumbled 95% in the third quarter, as the economic storm pelted sales of its core electronics products.


(MMM) - Get Report

, and chipmaker


(QCOM) - Get Report

also reported significant profit declines in the last quarter.

Sony lost 3.2% to $20.27 and Qualcomm lost 4.6% to $35.13, but 3M shares added 2% to $56.55.

In the wake of poor results, more companies announced headcount reductions.



, which lost 51 cents a share in the fourth quarter, said it will cut 4,500 jobs in 2009, including 2,000 to 3,000 positions that were announced in late 2008. Shares plummeted 29% to $4.99.


(ALL) - Get Report

shares gave up 21%, at $23.50, after it reported a $1.1 billion fourth-quarter loss and said it would eliminate1,000 jobs in its financial services unit.


(SBUX) - Get Report

said that after sharply lower profit in its recent quarter, it will close 300 stores and slow new store openings, resulting in as many as 6,700 company layoffs. It ended the session unchanged.

Also, Ford Motor Credit, the lending and financing arm of

Ford Motor

(F) - Get Report

, will cut about 20% of its U.S. workforce, or about 1,200 jobs, as part of a restructuring plan. Additionally, Ford announced that it had a net loss of $5.9 billion for the fourth quarter, and a full-year loss of $14.6 billion. The company maintains that it will not seek government help, but will use its existing credit lines for cash.

In the oil patch, dragging demand has weighed heavily on prices as well, and in response, OPEC

has cut production targets to try to balance the supply end of the equation. OPEC's secretary-general said Thursday that it's preparing to make further production cuts if prices don't rise in the coming weeks.

Crude oil gave up 72 cents at to settle at $41.44. Of the oil stocks,

Exxon Mobile

(XOM) - Get Report

lost 2.8%,


(CVX) - Get Report

gave back 4.3%, and


(COP) - Get Report

fell 6% during the session.

Taking a look at commodities, gold rose $16.50 to settle at $898.30 an ounce.

Longer-dated Treasuries were recently falling; the 10-year note was recently down 1 24/32 to yield 2.8%, the 30-year was giving up 3 29/32, yielding 3.5%.

The dollar was recently stronger against the pound, euro and yen.

Overseas, European exchanges were lower, with the FTSE in London and the DAX in Frankfurt shedding more than 2% each. Asia fared better, with Japan's Nikkei and Hong Kong's Hang Seng closing with gains.