Dow plunges 513 points; 2011 gains are wiped out

Updated: 11:15 p.m. ET

Stocks plunged, with the Dow Jones industrials ($INDU) tumbling 512 points, their worst one-day loss since December 2008 and ninth worst point loss, as investors worried that the U.S. economy may be slipping back into a recession. The overall market carnage wiped out all of the 2011 gains for the major averages.

The market rout was prompted in part by concerns that the Federal Reserve won't try to boost the economy again and the prospects of little -- if any help -- on the way from Congress or the Obama Administration.  A huge concern was what Friday's big jobs report will say. In addition, there were deep fears about the health of the European financial system; stocks on the continent fell sharply. Stocks in Brazil were down nearly 6%.

With today's losses, the market is now in a correction, with the Dow, the Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) all down more than 11% from the closing highs for 2011, reached on April 29. Nearly all of the declines for the indexes has come since July 21; the Dow's point loss in that time is about 1,340 points.

Gold (-GC) briefly surged above $1,680 an ounce for the first time and then sold off itself, and crude oil (-CL) dropped below $88 a barrel for the first time since mid-February. Brent crude dropped to $107.25 a barrel, down 5.3%. 

The Dow closed down 513 points, or 4.3%, to 11,384. The S&P 500 was off 60 points, or 4.8%, to 1,200, its lowest level since Nov. 30, 2010. The Nasdaq was off 137 points, or 5.1%, to 2,556, its lowest level since Dec. 1, 2010. The Nasdaq-100 Index ($NDX.X) was down 106 points, or 4.6%, to 2,207.

Article continues below.With Thursday's drubbing, the Dow is down 6.3% for the week with the S&P 500 down 7.1% and the Nasdaq off 7.3%.

The Dow is looking at its worst weekly performance since the week of Oct. 6, 2008, when the blue chips fell 18.2%. The S&P 500 and Nasdaq are looking at their worst weeks since the week of Nov. 17, 2008 when the S&P 500 fell 8.4% and the Nasdaq dropped 7.9%.

While gold fell back, investors bid hotly for Treasurys. The 10-year Treasury yield fell to 2.458% from Wednesday's 2.599%.

Gold settled down $7.30 to $1,659 an ounce after reaching as high as $1,684.90. Silver was off $2.33 to $39.43 an ounce, a decline of 5.6%. Crude oil was down $5.30, or 5.8%, to $86.63 a barrel, its lowest level since Feb. 18 as the Egyptian revolution neared its climax. It had reached as low as $86.04.

Futures trading suggests a slightly lower open, but don't pay much attention to the trading yet. Everything will change when the jobs report comes out. Japanese stocks tumbled at their Friday open. The Nikkei 225 Index ($JP:N225) was off 3.6% to 9,316 in early trading.

What started the blowoff?
The supposed trigger was a weak report on initial jobless claims. They were down 1,000 to  400,000. A week ago's estimate of 398,000 was revised to 401,000.

The number raised the worries for Friday's nonfarm payrolls and unemployment report. The report, which will come out at 8:30 a.m. ET, is expected to show little change in the unemployment rate, which was 9.2% in June and maybe an 85,000 gain in nonfarm payrolls.

But there were other big issues, including a move by the Bank of Japan to push the yen lower against major currencies, especially the dollar.

In addition, European stocks plunged on worries that debt problems for Greece, Portugal, Italy and Ireland were worsening. The European Central Bank unexpectedly began large-scale intervention in the euro zone debt markets, the first time since March, buying bonds in an apparent attempt to prevent the region’s sovereign debt crisis from engulfing Italy.

There were rumors in London that hedge funds were being forced to sell assets such as gold in order to cover deepening losses on other investments, the Guardian reported. This led to gold's surprising decline from a high of $1,684.90 to $1,659. Gold had surged as a safe haven bet in the eurozone and US debt crisis.

The market tensions also set off a furious battle between investors wanting safety in Swiss francs and the Japanese yen and the central banks of those countries who don't want their economies priced way too high.

Energy prices -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Crude oil (-CL)			$86.63			$91.93			-9.48%			-5.20%
(per barrel)
Heating oil (-HO)			$2.8939			$3.0189			-6.53%			13.77%
(per gallon)
Natural gas (-NG)			$3.9410			$4.0900			-4.92%			-10.53%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.7372			$2.9313			-10.49%			11.58%
(per gallon)
Brent crude			$107.25			$113.23			-8.13%			13.19%
(per barrel)
Retail gasoline			$3.7030			$3.7010			-0.19%			20.54%
(per gallon; AAA)

Worst selloff in a year
Today's selloff was the worst for the major averages since Dec. 1, 2008. Very little was spared.

General Motors (GM) was down 4.3% to $25.99 after second-quarter results beat estimates. But the company warned that profits in the second half of 2011 may be lower than first-half profits. Ford Motor (F) fell 6.8% to $10.86.

Mighty Apple (AAPL) and Google (GOOG) were off 3.9% each to $377.37 and $577.52, respectively.

All of the 30 Dow stocks were lower. The best performer were McDonald's (MCD), down 1.5% to $84.28 and Kraft Foods (KFT), which finished off 1.5% to $33.78.

Kraft announced plans today to spin off its North American grocery business to shareholders, splitting the existing company in two. The grocery business would consist of the company’s U.S. beverages, cheese, convenient meals and grocer segments and non-snack items in Canada and Food Service.

Only three S&P 500 stocks were higher: Motorola Mobility (MMI), Vulcan Materials (VMC) and PG&E (PCG).

None of the Nasdaq-100 stocks was higher. The top performers were Sears Holdings (SHLD) and Costco Wholesale (COST) , off 0.7% to $66.87 and $76.51, respectively. 

Winners and losers
Dendreon (DNDN) plunged 67.4% to $11.69. The drugmaker withdrew its sales estimates for 2011 and announced job cuts because of lower-than-expected growth in the use of prostate-cancer treatment Provenge. The problem is that the drug costs are extraordinarily high.

DirecTV (DTV) fell 5.7% to $46.63. The largest satellite-TV provider reported first-quarter profit that beat analysts’ estimates after gaining subscribers in the U.S. and Latin America.

Sotheby’s (BID) was off 2% to $39.19. The auction house said second-quarter earnings excluding some items were $1.83 a share, exceeding the $1.57 average analyst estimate.

Transocean (RIG) fell 8.6% to $53.98. The world’s largest offshore driller posted an 11th straight quarterly profit decline. Daily rental rates for the company’s vessels dropped as much as 26% during the second quarter because of competition from rival operators and an influx of newer rigs onto global drilling markets.

Walter Energy (WLT) declined 29.5% to $77.89. The southern Appalachia producer of steelmaking coal reported second-quarter revenue of $766.7 million, missing the $931 million average estimate by analysts in a Bloomberg survey.

Web.com Group (WWWW) soared 19.8% to $10.37. The company that builds Web sites for small businesses said it is buying Network Solutions and expects the deal to add at least 20% to the consensus estimate of its 2012 earnings.

Zipcar (ZIP) rose 0.6% to $23.23. The car- share company boosted its sales forecast for the full year to at least $240 million. Analysts project revenue of $238 million, according to the average of a Bloomberg survey.

Zumiez (ZUMZ) fell 19.7% to $21.77. The Everett, Wash.-based retailer reported comparable sales for July that missed analysts’ estimates for first month since December.

Short hits from the markets -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.010%			0.010%			-88.89%			-91.67%
5-year Treasury note			1.132%			1.239%			-17.55%			-43.85%
10-year Treasury note			2.458%			2.599%			-12.37%			-25.63%
30-year Treasury bond			3.722%			3.873%			-9.92%			-14.67%
Currencies
U.S. Dollar Index			75.36			74.199			1.79%			-4.95%
British pound			1.6263			1.6445			-1.04%			4.21%
(in U.S. $)
U.S. $ in pounds			£0.615			£0.608			1.05%			-4.04%
Euro in dollars			$1.41			$1.44			-2.05%			5.46%
(in U.S. $)
U.S. $ in euros			€ 0.709			€ 0.696			2.09%			-5.18%
U.S. $ in yen			79.30			77.16			2.93%			-2.54%
U.S. $ in Chinese			6.46			6.43			0.02%			-2.34%
yuan
Canada dollar			$1.021			$1.041			-2.49%			1.77%
(in U.S. $)
U.S. dollar			$0.980			$0.961			2.55%			-1.73%
(in Canadian $)
Commodities
Gold (-GC)			$1,659.00			$1,666.30			1.89%			16.72%
(per troy ounce)
Copper (-HG)			$4.236			$4.326			-5.45%			-4.76%
(per pound)
Silver (-SI)			$39.4310			$41.7580			-1.68%			27.46%
(per troy ounce)
Wheat (-ZW)			$6.8175			$7.1050			1.38%			-14.16%
(per bushel)
Corn (-ZC)			$6.9375			7.06			4.24%			11.45%
(per bushel)
Cotton			$1.0501			1.0442			2.87%			-27.48%
(per pound)
Coffee			$2.3585			2.419			-1.54%			-1.93%
(per pound)
Crude oil (-CL)			$86.63			$91.93			-9.48%			-5.20%
(per barrel)