Dow Closes Down 420 as Fear Rattles Street Again - TheStreet

NEW YORK (

TheStreet

) -- Stocks tanked amid a global selloff Thursday, spurred by escalating growth fears and disappointing U.S. economic data.

The

Dow Jones Industrial Average

came off slightly from its lows but still closed down 420 points, or 3.7%, at 10,991. The

S&P 500

lost 53 points, or 4.4%, at 1141, and the

Nasdaq

finished off by 131 points, or 5.2% at 2380.

>>

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>>

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The surprise plunge and soaring volatility brought back memories of the wild swings from last week. The VIX index, which takes into account options activity on the S&P 500, also known as the fear index, soared 43% and climbed to 45 points.

"Maybe the market bounced back too soon," said Stephen Carl, head equity trader at Williams Capital Group. "Confidence needs to be reinstalled out there."

Eurozone fears reared their ugly head Thursday and sent global markets into a tailspin before U.S. markets even opened. European banks came under pressure following a

Wall Street Journal

report that U.S. regulators are investigating the U.S. arms of big eurozone banks to assess risks amid intensifying financial pressures.

A note from Morgan Stanley deemed the U.S. and Europe "dangerously close to recession" because of unsatisfactory responses from policymakers.

In a separate note, Frank Engels, co-head of European economics at Barclays Capital, said European leaders' piecemeal approach has failed to deliver a solution and has fueled fears.

"Fears that the sovereign debt crisis in Europe will continue to escalate -- with fiscal sustainability now being questioned in Spain, Italy and even France -- have contributed significantly to the surge in volatility worldwide," he said. "We believe an intermediate solution while Europe prepares the steps necessary to flank monetary union with better integrated fiscal and economic policies would help move Spain and Italy away from the bad equilibrium where, on their own, they might be unable to stabilize the reinforcing negative dynamics of spreads and default possibilities."

"Germany and other core countries have a unique opportunity to use this crisis as leverage to better coordinate economic and fiscal policies and thereby effectively move closer to an economic union," he said.

Global economic data also offered little reason for investors to feel optimistic about global growth. In Japan, slowing exports in July called into question how quickly the country could rebound from its March earthquake disaster. In Britain, weaker than expected retail sales in July confirmed the threat of subdued consumer activity to the economy.

The FTSE in London sunk 4.5%, and the DAX in Frankfurt plunged 5.8%. Hong Kong's Hang Seng lost 1.3%, and Japan's Nikkei shed 1.3%.

The heightened uncertainty

took gold to record highs. Gold for December delivery broke to an intraday high of $1,829.70 an ounce. The precious metal gained $28 to settled at $1,822 an ounce.

Yields on U.S. Treasuries sunk below 2% briefly during intraday trading. The benchmark 10-year Treasury was up 30/32, diluting the yield to 2.099%. Yields flirted near record lows, with 2.058% being the lowest session close in history. The dollar strengthened against a basket of currencies, with the dollar index up by 0.63%.

.

The environment pressured risky assets, sending oil prices much lower. The September crude oil contract dove $5.37 to trade at $82.21 a barrel.

Economic data in the U.S. exacerbated fears stemming from across the Atlantic.

A massive miss in estimates on factory activity in the mid-Atlantic for August helped send the blue-chip index to session lows. The Philadelphia Federal Reserve reported that its reading on manufacturing activity plunged to -30.7, while Wall Street had anticipated that mild drop that would keep the index in positive territory.

The

number of people filing for unemployment insurance for the first time climbed back up above the 400,000 level last week. The Labor Department said initial jobless claims rose by 9,000 to 408,000 in the week ended Aug. 13. The rise was larger than the increase of 5,000 claims that economists had been expecting, according to Briefing.com.

Consumer prices climbed 0.5% higher in July, according to the Labor Department's consumer price index. Wall Street had been anticipating growth of 0.2% after a decline of 0.2% in June. The core rate, which excludes volatile food and energy prices and is considered the closest gauge of inflation, grew 0.2%, as expected, after an uptick of 0.3% in June.

The National Association of Realtors said existing-home sales unexpectedly dropped 3.5% in July, to 4.67 million from 4.96 million in June. Economists had expected sales to rise to 4.87 million from initially reported sales of 4.77 million in June.

Capital goods, conglomerate and technology stocks were showing the biggest losses during a session that saw 91% of the 3.2 billion shares that traded on the New York Stock Exchange declining, while only 8% were rising. Some 1.4 billion stocks changed hands on the Nasdaq.

All 30 Dow components traded in the red with

Bank of America

(BAC) - Get Report

,

Alcoa

(AA) - Get Report

,

Boeing

(BA) - Get Report

and

General Electric

(GE) - Get Report

lagged at the bottom.

Wal-Mart

(WMT) - Get Report

was the only Dow component that managed to edge into the positive, while

Procter & Gamble

(PG) - Get Report

and

Verizon

(VZ) - Get Report

took down the mildest declines.

The Justice Department is investigating whether

McGraw-Hill

(MHP)

unit

Standard & Poor's

improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to a

New York Times

report.

HP

(HP) - Get Report

slumped 8% after meeting expectations for third-quarter earnings per share and sales, but missing guidance on the fiscal fourth quarter. The largest PC maker reported revenue of about $127.2 billion for the full fiscal year, compared with analysts' expectations of $129 billion. The company also took a thrashing on news reports that it is exploring ways to get rid of its PC business and buy software maker

Autonomy

for $10 billion.

In other corporate news,

Consol Energy

(CNX) - Get Report

agreed to sell a 50% stake of its Marcellus Shale acreage in Pennsylvania and West Virginia to

Noble Energy

(NBL) - Get Report

for $3.4 billion. The companies said the joint development plan calls for the rig count to increase from four to 16 by 2015. Consol shares gained 0.4% to $42.59.

Dollar Tree

(DLTR) - Get Report

shares lost 1.4% to $65.54 after the discount retailer reported weaker-than-expected sales for the second quarter. The company's sales rose 12% to $1.54 billion, but fell short of estimates for $1.55 billion.

Sears

(SHLD)

reported a wider-than-expected adjusted loss of $1.13 a share in the second quarter and said sales fell 1.2% to $10.33 billion. Analysts had forecasted a loss of 64 cents a share on revenue of $10.5 billion. The stock lost 6.2% to $56.39.

Shares of

NetApp

(NTAP) - Get Report

sunk 14% after the computer

networking company gave a disappointing second-quarter outlook.

Apple

(AAPL) - Get Report

saw its stock decline almost 4% to $366.05 on news that

mobile ad executive Andy Miller is leaving to join venture capital firm Highland Capital Partners. Miller joined Apple when the company acquired

Quattro Wireless

.

--Written by Chao Deng and Melinda Peer in New York

.