Stocks fell for a fourth day on Thursday as a massive sell-off in commodities spilled into other markets, forcing investors out of riskier assets and rattling the equities market before Friday's payrolls data.
Oil suffered the biggest one-day price drop ever for the Brent futures contract, which settled down 8.6 percent at $110.80 per barrel. That drove oil shares lower, making the energy sector <.GSPE> the worst performer on the S&P as it fell 2.3 percent.
The CBOE volatility index <.VIX> jumped above its 50-day average before closing up 6.6 percent at 18.20, its highest closing level since March 28. The move signals investors are willing to pay more for protection for their equities exposure.
Adding to a recent spate of poor economic data, weekly applications for unemployment insurance rose to an eight-month high, setting off alarms a day before the April unemployment report.
It may very well be the case that the commodity price bubble has burst, said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany.
Silver prices were set for the deepest weekly decline in nearly 30 years. The iShares Silver Trust exchange-traded fund
The Reuters/Jefferies CRB index <.CRB> that tracks commodity prices fell 4.9 percent and was on track for its biggest weekly fall since late 2008.
The Dow Jones industrial average <.DJI> dropped 139.41 points, or 1.10 percent, to 12,584.17. The Standard & Poor's 500 Index <.SPX> fell 12.22 points, or 0.91 percent, to 1,335.10. The Nasdaq Composite Index <.IXIC> lost 13.51 points, or 0.48 percent, to 2,814.72.
The S&P 500 fell through its 14-day average but closed above 1,333, a level that could become an important market support, limiting future losses.
About 9.2 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, in a third consecutive trading volume above the year's average.
Declining stocks outnumbered advancing ones by a ratio of about 8 to 5 on both the NYSE and Nasdaq exchanges.
Consumer-related shares also fell but were the best performers as the drop in crude was seen lessening the financial burden on individuals of high gasoline prices.
U.S. retailers earlier warned of rising costs and cautious consumers even as a late Easter boosted sales of clothing and other holiday-related items in April, helping many beat sales expectations.
An index of airlines <.XAL>, a sector sensitive to fluctuations in energy costs, advanced 3.2 percent, its largest daily gain in almost two months.
Helping the Nasdaq, Electronic Arts Inc
(Reporting by Rodrigo Campos; additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)