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Wall Street abruptly sold off for the second-straight day as anxious market participants parsed through a flurry of headlines from across the globe.
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As of 3:00 p.m. ET, the Dow Jones Industrial Average tumbled 169 points, or 1.4%, to 11,736, the S&P 500 slid 21.3 points, or 1.7%, to 1,216 and the Nasdaq Composite dipped 48 points, or 1.8%, to 2,593.
Volume was light on the day, which often leads to increased levels of volatility. Indeed, the VIX, sometimes referred to as a fear gauge, jumped more than 6%. More than 90% of the shares traded on the New York Stock Exchange were in declining shares, pointing to the depth of the selling. Additionally, yields on U.S. government debt fell as traders piled into the safe haven. The benchmark 10-year note yields 1.991% from 1.964%.
In particular, energy, materials and technology fell sharply, while energy futures plummeted.
The benchmark crude oil contract traded in New York slid $3.77, or 3.7%, to $98.82 a barrel. Wholesale RBOB gasoline tumbled 12 cents, or 4.6%, to $2.51 a gallon.
The Organization of Petroleum Exporting Countries is considering paring back its estimate for oil demand for 2012 by 1 million barrels a day, according to a report by Reuters. Generally, lower demand is bearish for prices, which could prompt the cartel to slice supplies.
Europe's Spreading Debt Crisis
The debt crisis that started in the euro zone's periphery, in countries like Portugal, Ireland and Greece, is rapidly beginning to impact Europe's core economies, and other nations across the globe. Indeed, a report from Fitch saying the crisis poses "serious risks" to U.S. banks ignited a powerful selloff that shoved the blue chips 1.3% into the red in the final hour of trading on Wednesday.
Market participants have been paying particularly close attention to European debt yields, or the cost the countries need to pay lenders to borrow funds on the private markets. Higher yields reflect a greater implied risk premium, and make it more expensive for the country in question to refinance its sovereign debt.
Spain was forced to pay an average yield of 6.975% to sell a batch of $4.8 billion of 10-year bonds -- a euro-era high, and within easy reach of the 7% that prompted Ireland, Portugal and Greece to need a bailout from the European Union and International Monetary Fund. Investors also demanded France, Europe's second-biggest economy, which retains a top-notch "AAA" credit rating, pay 2.82% in its auction, up from 2.31% at the last one.
Adding to those worries, Fitch said Thursday the "crisis of confidence" in Italy and the euro zone could put Italian debt on an "unsustainable path." The ratings company also noted Europe's third-largest economy is likely in a recession, which may make it difficult for the government to pass through much-needed economic reforms.
The fear investors are facing is that the crisis may boil over, and materially affect economies that are too large to be bailed out, but are also systemically important.
European blue chips tumbled 1.1%, while the euro rose 0.08% to $1.347.
Jobs, Housing Data Beat Expectations, Manufacturing Disappoints
New claims for unemployment benefits fell to 388,000 last week from 393,000 the week before. Economists had expected an increase to 395.000. The number of individuals applying for first-time unemployment benefits has been stuck around the 400,000 level for months in a sign that the labor market is still struggling to find its footing.
Two measures of new home construction topped Wall Street's estimates. New housing starts fell 0.3% in October from September to a 628,000 unit rate, topping expectations of 610,000. Meanwhile permits to build new homes, considered a more forward-looking indicator, jumped 10.9% to a 653,000-unit rate, soaring past estimates of a 603,000-unit rate.
Manufacturing in the mid-Atlantic region expanded at a slower pace than expected in November, and at a weaker gate than economists expected. The Philadelphia Federal Reserve's manufacturing gauge fell to 3.6 for the month from 8.7 the month prior. Reading above 0 point to expansion while those below indicate contraction. The Philadelphia report is considered to be one of the key regional Fed reports on the manufacturing sector.
In metals, gold plummeted $54.10, or 3.1%, to $1,720 a troy ounce.
Boeing (NYSE:BA) shares got a lift from news Indonesia's Lion Air intends on committing to ordering 230 planes with a list price of $21.7 billion -- the American airplane giant's biggest commercial order to date.
European blue chips tumbled 1.1%, the English FTSE 100 dropped 1.6% to 5,423 and the German DAX fell 1.1% to 5,850.
In Asia, the Japanese Nikkei 225 rose 0.19% to 8,480 and the Chinese Hang Seng slipped 0.76% to 18,817.