Stock losses deepened Thursday after a report showed foreclosures hit a record high in the fourth quarter.
The Dow Jones Industrial Average was down about 50 points before the report; the blue-chip index's loss pushed into the triple digits after the report. Both the Dow and the S&P 500 index hit their lowest levels since January 22, when closely-watched lows were set.
The Mortgage Bankers Association said the proportion of mortgages that fell into foreclosure shot up to a record 0.83 percent, topping the prior record of 0.78 percent, set in the third quarter.
The mortgage-delinquency rate rose to 5.83 percent from 5.59 percent in the third quarter. The delinquency rate on subprime mortgages jumped to 5.29 percent from 4.72 percent.
In other economic news, the National Association of Realtors reported that existing-home sales were unchanged in January from December, better than the 1 percent drop economists had expected.
"This additional sign of a stabilizing market is encouraging, and our members are telling us there's been a pickup in shopping activity," said NAR chief economist Lawrence Yun.
Pending-home sales were off 20 percent from January 2007, but "with mortgage rates coming down the way they are, people are looking" to buy homes, Victor Pugliese, director of listed-equity trading at Broadpoint Securities told Reuters. "There is pent up demand."
Jobless claims fell by 24,000 last week to a lower-than-expected 351,000, the Labor Department reported. The four-week moving average, which smooths out weekly fluctuations, fell by 1,500 to 359,500.
The jobless-claims report and better-than-expected same-store-sales reports gave investors cause for optimism, but the bulls weren't biting.
"We're not in a situation anymore that, because a number is not quite as bad as we thought it was, we're going to turn that into a positive," Jim Iuorio, director of TJM Institutional Services, told CNBC. "Sentiment is overwhelmingly negative right now." Iuorio said the only thing that might budge the bears is a solid jobs report, which is due out Friday.
More Shoes Drop in Financial Sector
Financials came under fire again Thursday, with the S&P financial index down 2 percent in morning trading.
Thornburg Mortgage said it had received a notice of defaultfrom J.P. Morgan Chase for failing to meet a margin call of about $28 million. Thornburg provides so-called "jumbo" mortgages for high-end homes.
Bad news in the credit markets continued, with Carlyle Capital Corporation, an affiliate of private equity firm Carlyle Group, also saying it had not been able to meet some margin calls and had received a notice of default.
Merrill Lynch said on Wednesday it was quitting the subprime lending business because of the deteriorating market for home loans, firing 650 employees in that business.
Standard & Poor's cut its credit rating on Washington Mutual to "BBB" from "BBB+," saying the regional bank chain, based in Seattle, faces steeper losses on bad loans that previously expected.
And the market was disappointed that the plan for bond insurer Ambac, announced Wednesday, called for raising $1.5 billion in capital, not a bank-led bailout.
Goldman Sachs cut its price target on Ambac, as well as competitor MBIA, saying that Ambac's capital plan falls $1 billion short of what the bond insurer needs.
Elsewhere in the market, the dollar hit a new record low against the euro at above $1.53 and oil blew past $105 per barrel in Thursday trading.
Offering the dollar no relief, both the European Central Bank and the Bank of England left their respective interest rates unchanged.
Discounters Ring Up Sales
Early retail-sales results were decent, defying analysts' expectations that this would be the the worst February in about five years. According to Thomson Financial, 60 percent of retailers have topped estimates, while 40 percent have fallen short.
However, if you look closer at how consumers were spending, it's a little more worrisome: They were using gift cards to pay for groceries and spending around the time they received their paychecks, CNBC's Margaret Brennan pointed out.
Discounters turned in solid numbers as consumers are even more keen for bargains and staples in times of downturns.
Wal-Mart Stores said its February same-store sales rose 2.6 percent, far above analyst estimates of 1.1 percent, as consumers bought groceries and other staples but also discretionary items. Wal-Mart said sales of food, flat-panel TVs, digital-audio products, video games, pharmacy items and Valentine's Day seasonal merchandise were all solid.
Warehouse clubs Costco and BJ's also reported stronger-than-expected sales.
Wal-Mart rival Target , which is a discounter but with a more trendy, upscale edge, said it expects same-store sales to fall slightly in March, then start to climb in April.
Clothing retailers are already in a recession, according to Piper Jaffray retail analyst Jeffrey Klinefelter.
J.C. Penney said same-store sales fell 6.7 percent, while Kohl's sales fell 3.8 percent. Gap , which runs Gap, Banana Republic and Old Navy stores, reported such sales dropped 6 percent, more sharply than analysts had expected.
Even teen retailers and high-end department stores started to show some cracks.
Abercrombie & Fitch , American Eagle and Nordstrom all posted declines. Though, teen retailer Aeropostale and upscale department store Saks continued to post gains in same-store sales.
Investors continued to sell off shares of Macy's , which recently decided to stop issuing monthly same-store sales reports. The stock is already down more than 40 percent in the past year.
Blockbuster shares rose after the video-rental chain reported a better-than-expected earnings and said its restructuring efforts -- including cost reductions and job cuts -- will propel it to a fulll-year profit. Excluding severance costs and other one-time items, Blockbuster earned 26 cents a share, better than the 19 cents a share predicted by analysts surveyed by Reuters.
H&R Block also advanced as the largest U.S. tax preparer reported its quarterly loss narrowed as tax-return revenue offset costs related to job cuts and the closing of a subprime-mortgage unit.
Meanwhile, Warren Buffett is now the world's richest person, topping the just-released Forbes 2008 ranking of global billionaires, with an estimated wealth of $62 billion.
Microsoft's Bill Gates, who held the number one spot for 13 consecutive years, is now the third, while Mexico's Carlos Slim Helu is the second-richest person in the world.