Stocks came off their worst levels, but still finished sharply lower Thursday in heavy-volume trading as a gloomy outlook from the Federal Reserve in addition to ongoing economic jitters fueled concerns of a recession.
The Dow Jones Industrial Average plunged 391.01 points, or 3.51 percent, to finish at 10,733.83, led by United Tech , Caterpillar and Alcoa , but still finished above its August closing low of 10,719.94. The blue-chip index skid 528 points in its intraday low.
The blue-chip index is on track for its worst week in almost three years.
The S&P 500 plummeted 37.20 points, or 3.19 percent, to close at 1,129.56 after flirting with its key technical support level of 1,120. The Nasdaq declined 82.52 points, or 3.25 percent, to end at 2,455.67.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared above 41.
All 10 S&P sectors finished firmly in the negative territory, led by materials and energy.
“The near-term trading range for the S&P at 1,100 to 1,220 has just been a consolidation pattern, which is likely to see further downside below 1,100,” said Michael Sheldon, chief market strategist at RDM Financial Group. “If we break below that level on heavy volume, then we could be in for further downside near 1,020—that would represent a 50-percent retracement of the bull market from Mar. 2009.”
The Fed announced it would launch a new $400 billion program in a move to rebalance its $2.87 trillion portfolio—a version of the widely expected Operation Twist—by selling shorter-term notes and using those funds to purchase longer-dated Treasurys.
Despite the latest attempt to kickstart growth that slowed to a crawl over the first half of the year, the global markets remained unimpressed.
“You have to be a little bit schizo here—there’s what the Fed’s doing and there’s the overwhelming news coming out of Europe and those two things are playing against each other,” Kevin Ferry of TheContrarianCorner.com told CNBC.
“Look at the currency market, they’re tighter today than they were prior to the Fed’s activities and the Fed’s motions yesterday were aggressive," continued Ferry. "So there’s been a downtick in the mood here and it’s important to see how this plays out.”
Hewlett-Packard is expected to name former Ebay chief Meg Whitman as the new CEOafter-the-bell tonight, according to AllThingsD, replacing current CEO Leo Apotheker.
Adding to concerns of another global recession, China's manufacturing sector contracted for a third straight monthin September. The world's second-largest economy is especially vulnerable to fading demand from the U.S. and Europe, its biggest export markets.
In addition, business activity in France and Germany grew at its weakest pace in more than two years in September and new orders fell for a third month, underscoring a loss of momentum in Europe's largest economies.
Oil prices plungedwith U.S. light, sweet crude tumbled $5.41 to settle at $80.51 a barrel, its biggest one-day drop since Aug. 8. Meanwhile, London Brent crude fell $4.87 to settle at $105.49. Gold declined $66.40, or 3.7 percent, to settle at at $1,741.70 an ounce.
Gold miners Barrick and GoldCorp slumped.
European shares plunged to hit a 26-month low. Stocks briefly came off their lows following a report that the EU is looking to accelerate plans to recapitalze 16 banks that came close to failing last year's stress test. The move would affect mostly mid-tier banks.
FedEx slipped after the economic bellwether said it is trimming its earnings expectations for the fiscal year due to slowing global economic growth.
Meanwhile, Discover Financial Services posted a better-than-expected profit as customers spent more on their credit cards and delinquencies declined. However, the credit-card provider's shares still fell along with the broader market.
Sports apparel maker Nike is slated to post earnings after-the-bell.
Bed Bath & Beyond edged higher, bucking the broad market trend, after the retailer posted a profit that beat expectations. In addition, at least five brokerages raised their price targets on the firm.
Goodrich soared to lead the S&P 500 gainers after United Tech said it will agree to acquire the aircraft components maker in a $16.5 billion cash deal—the largest since 2000.
On the economic front, new claims for jobless benefits fell 9,000to 423,000 last week, according to the Labor Department.
And the Leading Economic Index gained for the fourth consecutive monthin August, according to the Conference board. However, the gains are still not enough to suggest the economy will pick up any time soon.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
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FRIDAY: IMF/World Bank annual mtg; Earnings from KBHome
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