The claims news comes ahead of Friday's government non-farm payroll data, which likely increased 85,000 last month, according to a Reuters survey, after rising only 18,000 in June. The unemployment rate is expected to hold steady at 9.2 percent.
“We’ve reduced our equity exposure by half at the end of the second quarter,” said Rob Stein, portfolio manager and senior economist of Astor Asset Management. “We’ll need to see the economic data stabilize.”
Adding to day's woes, JPMorgan cut its third-quarter U.S. economic growth forecastby 1 percent, pointing to recent developments in the U.S. economy. The firm added that it doesn't expect the Fed to raise interest rates until at least 2013.
The dollar soared against a basket of currencies. The greenback's surge came amid a weakening economic outlook and moves by Japan to intervene in the forex market to bolster the yen.
Meanwhile, gold reversed its gains, trading below $1,653 an ounceas investors opted for cash to cover losses outside of the bullion market amid deepening losses on Wall Street.
Bank of NY Mellon announced it will start charging "large depositors" to hold cashdueto a sudden increase in dollar deposits prompted by fears among its customers.
All 10 S&P sectors were trading lower, led by energy, materials and industrials.
Oil prices tumbled, with U.S. light, sweet crudecrashing through technical support of $86.25 a barrel, its lowest level since February. London Brent crude fell below $109. Major oil giants ExxonMobil and Chevron tumbled.
Among earnings, GM fell even after after the automaker posted earnings that nearly doubled, as the firm a larger share of sales globally and raised prices on its vehicles.
Kraft Foods earnings beat estimates, raised its guidance and announced it will split in two. Major investor Nelson Peltz said he is excited about the split and has been increasing his stake in the firm. Berkshire Hathaway is also one of Kraft's biggest shareholders.
AIG and Sunoco are expected to post earnings after-the-bell tonight.
U.S. warehouse club operator Costco posted a better-than-expected chain-store sales, helped by higher gas prices and strengthening foreign currencies. Teen-oriented chains Hot Topic and Wet Seal blew past estimates, but rival Zumiez missed expectations.
Dendreon plunged over 60 percent after the drugmaker abandoned its forecast for its prostate cancer vaccine Provenge and said it plans to cut jobs to reduce costs.
Coming Up This Week:
FRIDAY: Employment situation, consumer credit; Earnings from P&G
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