Wall Street stock indexes fell for a fourth straight day on Thursday as a massive sell-off in commodities spilled over into other markets, forcing investors out of higher-risk assets and rattling equities markets before Friday's U.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 tumbled 11.9 percent on its highest volume ever, near 295 million shares. Its 50-day volume average stands below 60 million shares.
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 still closed above 1,333 -- a level that could become an important market support, limiting future losses.
About 9.26 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, in a third consecutive trading day with volume above the year's average, indicating investors are selling with conviction.
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.
Ross Stores gained 6.9 percent to $78.55 after its sales beat forecasts.
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 closed at its highest level since August 4 2009, up 8.8 percent at $21.68 a day after posting strong earnings.
(Reporting by Rodrigo Campos; additional reporting by Caroline Valetkevitch; Editing by Gary Crosse)