The Dow and S&P slumped for a third straight day on Thursday as investors continued to fret about the economic impact of continued violence in Libya and oil prices, though gains in Priceline kept the Nasdaq in positive territory.
In a volatile session, the S&P 500 broke through a trendline dating back to August that connected lows in late August with lows reached in late November. Selling accelerated after this line was broken, and the Dow momentarily dropped below 12,000 for the first time since February 3, though the market later rebounded from these losses.
The S&P 500 is down more than 3 percent for the week so far and the CBOE Volatility Index <.VIX> is up more than 30 percent, a sign of increased investor fear. The VIX spiked again on Thursday, though it later turned negative to fall 1.4 percent.
Technical guys are now saying the next real support is at 1,275 and are selling, said Jack De Gan, chief investment officer at Harbor Advisory in Portsmouth, New Hampshire. As long as oil prices go up, stocks will go down.
Oil has risen more than 15 percent over the past three sessions. The sharp rise has fueled worries about the impact of energy costs on economic activity.
Oil futures were at their highest since late August 2008 as the escalating problems in Libya sparked supply worries. Brent rose near $120 in intraday trading though it later pulled back to $111.12. The U.S. Dollar Index <.DXY>, which measures the dollar's performance against a basket of major currencies, fell 0.4 percent.
Libya, to the extent it keeps pushing oil higher, will continue to have an impact throughout the economy, said David Spika, investment strategist at Westwood Holdings Group Inc in Dallas, which manages $12.5 billion. If oil gets to $125 per barrel, that will be significant. You could see a lot of deterioration at that level.
The Dow Jones industrial average <.DJI> was down 40.99 points, or 0.34 percent, at 12,064.79. The Standard & Poor's 500 Index <.SPX> was down 2.54 points, or 0.19 percent, at 1,304.86. The Nasdaq Composite Index <.IXIC> was up 10.75 points, or 0.39 percent, at 2,733.74.
Priceline.com Inc jumped 9.1 percent to $464.75 after a number of brokerages raised their price targets on the stock. The online travel agency reported a larger-than-expected profit late Wednesday.
General Motors Co's earnings topped estimates, but the stock slid 4.5 percent to $33.05 on concerns about the pressure from rising oil.
In economic news, new U.S. claims for jobless aid fell last week, hinting at an improvement in the labor market, but declines in new home sales and orders for a range of factory goods in January showed the economy still faced headwinds.
(Additional reporting by Angela Moon; Editing by Jan Paschal)